The Islamic Theory of Distribution

The first form of economic wealth is the natural resources of the environment. Unjust distributtion of economic wealth begins with the problem of ownership of these natural resources. One must know who has the right of ownership of these resources in Islam. Sadr, thus, must develop the theory of distribution of
natural resources at two stages: preproduction and postproduction stages, or what he calls primary wealth and secondary wealth, respectively. His endeavour is to dis­cover the doctrinal basis of Islamic teaching concerning economic ownership. For him, the study of economics in its empirical sense at this stage is irrelevant to the issue of social justice. In other words, he is building an ideological theory which addresses this issue. The empiri­cal study of economics comes much later to evaluate whether the application of the ideological theory in the realm of life has an ade­quate basis in reality.
The first step to end the contradictions in the economic structure of society begins with the distribution of economic resources among people. A just social system is one that allows all people to benefit from economic wealth. The Islamic economic system, accordingly, is based upon this criterion.
The first form of economic wealth is the natural resources of the environment. Unjust distributtion of economic wealth begins with the problem of ownership of these natural resources. One must know who has the right of ownership of these resources in Islam. Sadr, thus, must develop the theory of distribution of natural resources at two stages: preproduction and postproduction stages, or what he calls primary wealth and secondary wealth, respectively. [6] His endeavour is to dis­cover the doctrinal basis of Islamic teaching concerning economic ownership. For him, the study of economics in its empirical sense at this stage is irrelevant to the issue of social justice. In other words, he is building an ideological theory which addresses this issue. The empiri­cal study of economics comes much later to evaluate whether the application of the ideological theory in the realm of life has an ade­quate basis in reality.
Distribution of Natural Wealth
In constructing the conceptual framework of his theory, Sadr also disagrees with political economists on the scope of economic resources. He disregards capital and labour as parts of economic resources. It is only nature that can be taken into account in the theory of distribution of natural resources. "For capital is, in fact, a produced wealth and not a primary source of production, because it represents, economically [speaking], any wealth which is produced and generated through human labour that can be reinvested in the development of new wealth. [7]
On the other hand, nature itself is classified into four categories: 1) land; 2) raw material; 3) water; and 4) other natural resources such as living species in the air, sea and on land. [8] Although the laws of Islam seemingly contain different regulations for each one of these categories, Sadr used his ingenuity to discover the common ground between them, giving his interpretation of what he calls "The General Economic Theory of Islam."
The sole owner of land and raw materials is the Islamic State. People may gain special rights of ownership if they invest their labour to develop these natural resources, such as cultivating land and mining minerals. Individuals may gain precedence over others for a piece of land or source of minerals which they work. The special right of owner­ship may be gained only through labour invested in developing that land or raw material, and such right expires as soon as that development ends. [9] People utilizing these resources must pay property taxes for their use to the Islamic State.
Water, on the other hand, can be owned if it is possessed for economic development. Although the sole proprietor of the natural resource of water is the State, all people have access to it for their use. The only exception is underground water, where the individual who invests his labour to develop its utility has an exclusive right to its use and benefits. [10]
Other natural resources, such as birds, animals, plants and marine life, are publicly owned. These sources of economic wealth may be­come private property through individual effort. [11] As such, people, not the State, have the exclusive right to own resources via their labour. They may not lose this right indefinitely, or pay property taxes for their possession.
Based on this view, Sadr concludes that people themselves or, in more concrete terms, their representative government, are the sole and legitimate owner of the natural resources. Individuals may gain special privileges to make use of these resources only through their invested labour to develop these resources. Other types of individual labour, such as the use of force to possess, are not considered legitimate means to ownership. Specifically, it is only invested human work that has legal significance for ownership of natural resources. Generally speak­ing, Islam gives individuals the right to own private property only through their continuous effort to develop these resources to benefit society as a whole. Once private development of these natural resources is suspended, the right of private ownership would cease too. [12] From this Sadr derives the first principle of his theory:
All natural wealth is part of the public sector and individuals gain the special rights to use them only on one ground, that is, labour characterized by
development [of these resources] by the direct work [of the individual himself]. [13]
According to the above principle, an individual may not use other individuals to develop a natural resource in order to have the right of ownership of a large estate, for example; otherwise they will share the ownership and the benefits of that natural wealth on the basis of their labour. Islam totally rejects the capitalitic principle of individual ownership of vast natural resources on the ground that they are devel­oped by the labour of others. For the same reason, industries for the development of such natural resources as oil and minerals can be owned and managed only by the State. Notwithstanding the emphasis on public ownership of natural resources, Sadr introduces the concept of the "priority right of use" of natural economic resources by the indi­vidual. He states that those who possess the labour and will to exploit the resources have the right to gain access to them if such exploitation serves public interest.
Distribution of Produced Wealth
Sadr, furthermore, develops an Islamic theory of distribution of produced commodities. Produced wealth is classified into: (1) primary commodities, such as agricultural produce and raw materials; and (2) secondary commodities, which are the primary commodities manufactured into different products. In both of these stages of pro­duction, capital generated from previous economic endeavour as well as the means of production (tools and machineries) take part in the production process in these advanced economic activities. However, contrary to the capitalist theory, each of these components has no share of the product but they gain special rights for their use and their wear‑and‑tear in the production
process.
As mentioned under the previous principle, Islam gives the worker the sole right of ownership of produced goods. However, Sadr realizes that human labour is but one of the components in the production of primary commodities. The other components are the natural environ­ment and the tools which help man in the process of production. The tools, or means of production, according to Sadr, "contain stored up work of previous stages of production that will be exhausted and depleted during their use in the process of production." [14] In this case, if the tools are not property of the worker who benefits from their use during the process of production, then the legitimate owner of these tools must get paid for the use of his tools, i.e., the depleted stored up work in the tools. [15] According to Sadr, herein lies one of the major ‘ideological differences between capitalism and Islam. The former regards the owner of the means of production as the sole owner of the produced commodities, whereas Islam considers only the labourer to have the legitimate claim to the commodities produced. In capitalism, tools get a share of the product because their use, like human labour, represents expenditure of a certain amount of work in the production process. In Islam, tools only assist and aid man to facilitate the process of production; thus, they must be compensated for in rent, not in profit sharing. [16]
Accordingly, only the labourer has the legitimate claim to the products of his effort. Therefore, it is unthinkable in Islamic economics, states Sadr, for someone to employ others and provide them with rent and tools so that he alone owns the products of their labour. [17] Likewise, industries and production units that employ many workers can function in an Islamic State only if they are owned publically. In Sadr’s theoretical vision industrial capitalist production can no way evolve in an Islamic economic system except through State’s direct involvement and control in economic development. The State, on behalf of society, which is the sole owner of economic resources, can employ people and pay them only wages for their work and not give them share of the produced commodities.
Furthermore, since the utilization of the economic wealth of the environment is the responsibility of society as a whole‑the sole proprietor and beneficiary of natural resources‑it gets a share of the produce of primary commodities. The State, in this stage of produc­tion, has the right to collect what is known as tasq (income tax) from producers to finance social welfare expenditures and meet the eco­nomic needs of the people. [18]
As for the production of secondary commodities, Islam gives the owner of primary commodities the right to establish his claim to final products. The legitimacy of his ownership does not cease because someone aids him in transforming his commodity into different forms. An individual, if he/she owns the raw materials, has the right to manu­factured commodities produced out of that material. To put it plainly, the worker, in this case, does not only own the product of the natural resources but also the produced commodities in latter stages of pro­duction. If the State, for example, extracts or mines certain natural resources through its publically owned enterprises, then it also has the right of ownership of all the finished goods extracted from those natural resources. People who participate in the production would get paid for their labour. Industries that develop natural resources, such as oil and minerals, theoretically speaking, cannot be owned privately in an Islamic economic system. It is because the State is the primary owner of natural resources, which gives it the right to own the pro­duced product. However, there is a theoretical loophole to make capitalists flourish in an Islamic economic system, which is through the obtaining of natural resources from the State on lease by private enterprises, where the latter can claim legitimate ownership of the produced commodities.
In any case, ownership is not affected by the use of the means of production belonging to someone else. The owners of tools and ma­chines get paid for the use of these in the production process. By the same token, the owner of primary commodities may also hire someone else to manufacture his goods. The worker, this case, gets the salary for his labour, which should be specified in the job contract. The worker, consequently, has no claim on the final product he produces. [19]
Islam specifies two means of payment for a hired worker: the first one is through wages, where he is paid for the amount of work he performs in accomplishing a task; the second is by sharing in the profit of the final product. In this case, the worker gets only a per­centage of the profit specified in the agreement between him and the owner of the primary commodities. The general principle, in Islam, for earning is:
…that earning is only based on contribution of labour during the process (of production), so the contributed labour is the only legitimate means for some­ one to get paid by the owner of the process…and without such contribution, there is no legitimacy for his earning. [20]
Based on this economic principle, the owner of capital will not receive fixed payment from the owner of primary goods, i.e., it is usury, which is prohibited. Monetary capital will not be considered as contributing any amount of labour at all. [21] Fixed payment is allowed in Islam only in one case, where there is a consumption of labour, either directly through a worker, or indirectly (accumulated work) through the means of production. As for monetary capital, no such work is exhausted or depleted. In this matter, the owner of the capital is allowed to share the profit and the loss with the owner of primary commodities. The legitimacy of earning in this situation is based on his help in facilitating the process of production, for which he deserves to be rewarded in the form of
profit sharing.
Notes:
[6]. Al‑Sadr, "al‑Nazariyyah al‑’Islamiyyah li‑tawzi’ al‑masadir al‑tabi’iyyah" (Islamic Theory of Distribution of Natural Resources) in Ikhtarnalak (Beirut:
Dar al‑Zahra’, 1982), 136‑137.
[7]. "Al‑Nazariyyah," 138.
[8]. Iqtisaduna, 433.
[9]. Ibid., 483.
[10]. Iqtisaduna, 519‑520.
[11]. Ibid., 5 2.
[12]. "Al‑Nazariyyah al‑’Islamiyyah li tawzi’," 148.
[13]. Al‑Sadr, Khutat tafsiliyyah `an iqtisad al‑mujtama` al‑’Islami (General Basis of Economics of Islamic Society), in al‑Islam yaqud al‑hayat, 88.
[14]. Iqtisaduna, 619.
[15]. Iqtisaduna, 584.
[16]. Al‑Khutat al‑tafsiliyyah, 97.
[17]. Ibid., 99.
[18]. Al‑Khutat, 561.
[19]. Iqtisaduna, 605.
[20]. Iqtisaduna, 618.
[21]. Ibid., 625‑627.
An Islamic Perspective of Political Economy: The Views of (late) Muhammad Baqir al-Sadr
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Economic Relationships

Man’s behaviour, according to Sadr, is categorized into three types of relationships: social, economic and religious. They stem from man’s basic relationship to other men, to the environment, and to God. The economic relations, however, are outcome of his inner instinct of self‑love that "always drives him to seek good thins for himself, to secure his interest, and satisfy his needs.

Man’s behaviour, according to Sadr, is categorized into three types of relationships: social, economic and religious. They stem from man’s basic relationship to other men, to the environment, and to God. The economic relations, however, are outcome of his inner instinct of self‑love that "always drives him to seek good thins for himself, to secure his interest, and satisfy his needs. [2] Accordingly, man, in his relationship with the environment, was predisposed to utilize all possi­ble resources to satisfy his needs and increase his pleasure. In due time, he was willing to use animals and plant to help him in his struggle against the environment. Although his essential needs were simple in the early period of history, his mental capacities enabled him to devel­op new means to help him utilize the resources of the environment. Thus his needs are always expanding due to the complexity of utilizing the resources of the environment.

Man’s relationship with others of his kind was the natural outcome of his need to satisfy his desires. The complexity of life, arising from his relationship with the environment, made it difficult for him to cope adequately with his needs. Cooperation with others made the effort to satisfy his needs manageable.
Cooperation with others result in a shar­ing of benefit with all participant in the community. [3] The inner instinct of self‑love that drove man to create the first community are evident. These instinct gave rise to man’s exploitation of his brother.

Because people were not equal in their physical and mental capacities, they obviously differed in their utilization of the resources of the environment.
Such differentiation of capabilities is part of the divine plan for bringing about cohesion through the division of labour to the human community. People of
different capabilities function in different tasks within the social order. [4] However, man’s desire to maximize his interest drove some men to exploit the situation for their benefit. Human needs were growing due to man’s mental and economic development. His experience broadened his capacities to utilize the resources of his environment. His passion to acquire more of the environmental resources for himself became prevalent. Consequent­ly, some men were willing to oppress others to satisfy their greed and egos (both outcome of self‑love). It was then that the human com­munity faced oppression in the form of economic exploitation.

This conflict between social peace and individual instinct of maximizing interest was persistent throughout history. This historical conflict, Sadr
argues, is between two classes: those individuals who control the environmental resources (economic and social) and endeavour to protect their interest, and the rest of the society which strives to live in peace and cooperation. Marxist believe the problem originated with a few people controlling economic resources. The only way to bring about peace to the social order is through the revolution of the oppressed class to destroy the special interest of the privileged class. Capitalist, on the other hand, believe such social conflict to be the result of limited natural resources of the environment, which are not sufficient to satisfy the needs of all people. [5] Thus, social conflict will always be prevalent. Only through incremental and gradual reforms can society hope to manage social conflict from overtaking human progress. On this basis, capitalists oppose any type of social revolution. However, Islam disagrees with both the views and considers environ­mental resources to be sufficient to satisfy all people’s needs.

According to Sadr, the proem rests with the channelling of human nature: how can the instinct of self‑love be directed in a proper manner? Unless a solution emerges to control human desires and deflect the potential for exploitation of others, social order rests on shaky foundations. Therefore, $adr clearly states that the socioeconomic problem is the result of the misconduct of man. He specifies two reasons for the socioeconomic problems: (1) the oppressive character of man, arising from his self‑love; and (2) man’s inefficiency in the utilization of economic resources.

According to Sadr’s interpretation, the ills stemming from man’s oppressiveness in the economic realm of life persist in the form of inequitable distribution of economic resources on the one hand and from inefficient utilization of these resources, which result in under­development of economic resources and their waste. A solution must overcome these two basic ills of the economic behaviour of man. Sadr specifies three components of the Islamic solution: (1) cessation of the various forms of oppression manifest in the unjust distribution of economic resources; (2) disciplining of "human nature to achieve control of the instinct of self‑love; and (3) utilization of economic resources to satisfy the needs of all humanity.

Notes:

[2]. Al‑Sadr, "Al‑Nizam al‑’Islami muqaranan bil‑nizam al‑ra’smali wa al‑Markisi" (The Islamic System Compared with the Capitalist and the Marxist Systems) in Ikhtarnalak, 160.

[3]. Ibid., 161

[4.] Al‑Sadr, Iqtisaduna (Our Economics) (Beirut: Dir al‑Ta’aruf, 1982),
311­313.

[5]. Here Sadr seems to mention the view of Thomas Robert Malthus. He dis­regards other capitalist economic thinkers who believe that the source of economic problem is the distribution of economic wealth.

Source – An Islamic Perspective of Political Economy: The Views of (late) Muhammad Baqir al-Sadr

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Islamic Finance

There is a “mystery” we must explain: How is it that as corporate investments and foreign aid and international loans to poor countries have increased dramatically throughout the world over the last half century, so has poverty? The number of people living in poverty is growing at a faster rate than the world’s population. What do we make of this?

Over the last half century, U.S. industries and banks (and other western corporations) have invested heavily in those poorer regions of Asia, Africa, and Latin America known as the “Third World.” The transnationals are attracted by the rich natural resources, the high return that comes from low-paid labor, and the nearly complete absence of taxes, environmental regulations, worker benefits, and occupational safety costs.

The U.S. government has subsidized this flight of capital by granting corporations tax concessions on their overseas investments, and even paying some of their relocation expenses—much to the outrage of labor unions here at home who see their jobs evaporating.

The transnationals push out local businesses in the Third World and preempt their markets. American agribusiness cartels, heavily subsidized by U.S. taxpayers, dump surplus products in other countries at below cost and undersell local farmers. As Christopher Cook describes it in his Diet for a Dead Planet, they expropriate the best land in these countries for cash-crop exports, usually monoculture crops requiring large amounts of pesticides, leaving less and less acreage for the hundreds of varieties of organically grown foods that feed the local populations.

By displacing local populations from their lands and robbing them of their self-sufficiency, corporations create overcrowded labor markets of desperate people who are forced into shanty towns to toil for poverty wages (when they can get work), often in violation of the countries’ own minimum wage laws.

In Haiti, for instance, workers are paid 11 cents an hour by corporate giants such as Disney, Wal-Mart, and J.C. Penny. The United States is one of the few countries that has refused to sign an international convention for the abolition of child labor and forced labor. This position stems from the child labor practices of U.S. corporations throughout the Third World and within the United States itself, where children as young as 12 suffer high rates of injuries and fatalities, and are often paid less than the minimum wage.
The savings that big business reaps from cheap labor abroad are not passed on in lower prices to their customers elsewhere. Corporations do not outsource to far-off regions so that U.S. consumers can save money. They outsource in order to increase their margin of profit. In 1990, shoes made by Indonesian children working twelve-hour days for 13 cents an hour, cost only $2.60 but still sold for $100 or more in the United States.

U.S. foreign aid usually works hand in hand with transnational investment. It subsidizes construction of the infrastructure needed by corporations in the Third World: ports, highways, and refineries.

The aid given to Third World governments comes with strings attached. It often must be spent on U.S. products, and the recipient nation is required to give investment preferences to U.S. companies, shifting consumption away from home produced commodities and foods in favor of imported ones, creating more dependency, hunger, and debt.

A good chunk of the aid money never sees the light of day, going directly into the personal coffers of sticky-fingered officials in the recipient countries.

Aid (of a sort) also comes from other sources. In 1944, the United Nations created the World Bank and the International Monetary Fund (IMF). Voting power in both organizations is determined by a country’s financial contribution. As the largest “donor,” the United States has a dominant voice, followed by Germany, Japan, France, and Great Britain. The IMF operates in secrecy with a select group of bankers and finance ministry staffs drawn mostly from the rich nations.

The World Bank and IMF are supposed to assist nations in their development. What actually happens is another story. A poor country borrows from the World Bank to build up some aspect of its economy. Should it be unable to pay back the heavy interest because of declining export sales or some other reason, it must borrow again, this time from the IMF.

But the IMF imposes a “structural adjustment program” (SAP), requiring debtor countries to grant tax breaks to the transnational corporations, reduce wages, and make no attempt to protect local enterprises from foreign imports and foreign takeovers. The debtor nations are pressured to privatize their economies, selling at scandalously low prices their state-owned mines, railroads, and utilities to private corporations.

They are forced to open their forests to clear-cutting and their lands to strip mining, without regard to the ecological damage done. The debtor nations also must cut back on subsidies for health, education, transportation and food, spending less on their people in order to have more money to meet debt payments. Required to grow cash crops for export earnings, they become even less able to feed their own populations.

So it is that throughout the Third World, real wages have declined, and national debts have soared to the point where debt payments absorb almost all of the poorer countries’ export earnings—which creates further impoverishment as it leaves the debtor country even less able to provide the things its population needs.

Here then we have explained a “mystery.” It is, of course, no mystery at all if you don’t adhere to trickle-down mystification. Why has poverty deepened while foreign aid and loans and investments have grown? Answer: Loans, investments, and most forms of aid are designed not to fight poverty but to augment the wealth of transnational investors at the expense of local populations.

There is no trickle down, only a siphoning up from the toiling many to the moneyed few.

In their perpetual confusion, some liberal critics conclude that foreign aid and IMF and World Bank structural adjustments “do not work”; the end result is less self-sufficiency and more poverty for the recipient nations, they point out. Why then do the rich member states continue to fund the IMF and World Bank? Are their leaders just less intelligent than the critics who keep pointing out to them that their policies are having the opposite effect?

No, it is the critics who are stupid not the western leaders and investors who own so much of the world and enjoy such immense wealth and success. They pursue their aid and foreign loan programs because such programs do work. The question is, work for whom? Cui bono?

The purpose behind their investments, loans, and aid programs is not to uplift the masses in other countries. That is certainly not the business they are in. The purpose is to serve the interests of global capital accumulation, to take over the lands and local economies of Third World peoples, monopolize their markets, depress their wages, indenture their labor with enormous debts, privatize their public service sector, and prevent these nations from emerging as trade competitors by not allowing them a normal development.

In these respects, investments, foreign loans, and structural adjustments work very well indeed.

The real mystery is: why do some people find such an analysis to be so improbable, a “conspiratorial” imagining? Why are they skeptical that U.S.
rulers knowingly and deliberately pursue such ruthless policies (suppress wages, rollback environmental protections, eliminate the public sector, cut human services) in the Third World? These rulers are pursuing much the same policies right here in our own country!

Isn’t it time that liberal critics stop thinking that the people who own so much of the world—and want to own it all—are “incompetent” or “misguided” or “failing to see the unintended consequences of their policies”? You are not being very smart when you think your enemies are not as smart as you. They know where their interests lie, and so should we.
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What do you know about Islamic Economics?

People have increasingly been, for quite some time, demanding to get the series of “The Islamic School” out, and the dear readers have been insisting that I must issue a new series for them.
I have been reluctant to respond to such requests due to my desire to focus my efforts on finishing the second volume of Iqtisaduna (“Our [Islamic] Economics”). The publication of this latter book has been the reason behind the increasing demand that I should issue a brief series explaining and simplifying the book’s researches so that they may become accessible and comprehensible by a larger number of readers.
On this basis, I have written this series, taking special pains to make it simple, avoiding the level of precision and depth which I retained while researching “Our Economics.” On numerous occasions, I have preferred to explain an idea rather than describing its precise form, since the latter is already available in our detailed books.
While introducing this series to its readers, I shall first try to summarize its ideas for them and provide them with a table of contents which ought to help them comprehend it and follow its chapters.
This series includes raising one question and the attempt to answer it. The question is: “Does an economic doctrine exist in Islam?”
In this series, we shall gradually answer this question in the affirmative. After we raise the question, we will be busy explaining it and everything relevant to it. After that, we shall study the answer in the light of our comprehension of Islam, supporting it with proofs and discussing any objections to it.
Explaining the Question
What we mean by discussing the economic doctrine is finding a method to regulate the economic life according to the principle of equity. When we inquire about the economic doctrine in Islam, we express our desire to know whether or not Islam has brought a way to regulate the economic life as capitalism, for example, has brought forth the principle of “economic freedom,” using it as its own general outline in regulating the economic life.
Our Need for Raising the Question
Our need to put forth such a question springs from numerous reasons among the most significant of which is probably Islam’s rejection of capitalism and Marxism, the two systems that rule the world nowadays. Islam’s negation of both of these systems obligates the Muslim individual to expect Islam to bring a substitute for them to regulate the economic life, since the Muslim society cannot do without a method for such organization, no matter what form it may have.
Misunderstanding the Question
Having laid the question down, clarified it and explained its significance, we explicate the error some people make while trying to understand this question without making a distinction between the “economic doctrine” and the “science of economics” in Islam. What we really mean here is the economic doctrine, not the science of economics.
How to Distinguish Between the Doctrine and Science
In order to avoid misunderstanding this question, we shall elaborately explain the difference between the economic doctrine and the science of economics. In fact, the difference between them is significant. The economic doctrine, as we have come to know, takes upon itself to discover a method for the regulating of the economic life according to the principle of equity. As for the science of economics, it does not provide a method for such regulating; rather, it derives its approach from the followed paths of societies, studying their outcomes and consequences, just as the naturalist studies the results and effects of, say, heat generating.
Example for the Difference Between Doctrine and Science
We shall use many examples to explain the difference between the economic doctrine and the science of economics. The capitalist creed, for example, regulates the economic life upon the basis of the principle of economic freedom; therefore, it regulates the market upon the basis of the sellers’ freedom to determine the price of their goods. The science of economics does not attempt to bring forth another method for regulating the market; instead, its role is to study the market’s condition in the shade of the capitalist method, researching the fluctuation, fixing, rising or falling of prices in the free market as regulated by the capitalist method.
The doctrine, therefore, finds a method for regulating economics, according to its concept of equity, while the science of economics studies the results of such a method when it is imposed on the society.
Emphasizing that Islamic Economics Comprise a Doctrine
After putting forth several examples explaining the differences between doctrine and science, we shall emphasize the fact that by the economic doctrine, whose existence in Islam we have been questioning and answering in the affirmative, we do not mean here the science of economics. As a religion, Islam does not have to discuss the sciences of economics, astronomy, mathematics, etc. We mean by it, rather, the economic doctrine itself.
Our research and inquiry are about whether Islam provides a method for regulating the economic life, not whether Islam undertakes upon itself to conduct a scientific study of the available means and methods of economics contemporary to its advent and of their results. Such is the task of scientists of economics, the economists.
The series arrives, after that, at an explanation of the viewpoint regarding the answer, deriving the accurate concept from the Islamic legislative system (Shari’a) which absorbs and incorporates different fields of knowledge. We prove this even by the very nature of Shari’a and its sources. After that, we shall dispel some doubts cast about the belief in the existence of the Islamic economics, and we shall answer these, too.
In particular, I would like to refer to the allegation which says that Islam has brought ethical principles, and that it did not bring an economic system to regulate life; so, it is allegedly a mere preacher, not a system maker. We will explain how this charge capitalized on the ethical aspect of Islam and used it to overshadow the characteristics of its social organization despite the fact that Shari’a has indeed tackled both fields.
It has, as a religion, applied the ethical aspect in order to ethically nurture the individual Islamically, and it has practiced the social organization as a system chosen by God for all the human family.
This briefly sums up this discussion and its subject-matters. The details of these researches and subject-matters follow.
Is There an Economic System in Islam?
Probably the most persistent question which occupies many minds, one which is repeated on every tongue and is recurrent with every problem through which the nation passes as long as it exists, is the question regarding the economic doctrine in Islam; so, is there any economics theory in Islam? Can we find a solution for this polar contradiction between capitalism and Marxism, which is dominating the world nowadays, through a new substitute derived from Islam and extracted from its method of legislation and organization? What is the extent of the potential of this new Islamic substitute in providing a good standard of living, in carrying out its message to the nation which is suffering nowadays from a severe doctrinal dilemma within the tumultuous torrent of such intense conflict with capitalism and Marxism?
Contemplating on this new substitute, or wondering about its reality and Islamic context, is not an intellectual luxury a Muslim relishes; rather, it is an expression of the disappointment of the Muslim individual with both contesting wrestlers and a manifestation of his own reaction to their failure throughout the various experiences he has lived, the failure of the combating wrestlers, capitalism and Marxism, in filling the Muslim nation's doctrinal and ideological vacuum.
Contemplating on the Islamic substitute, or inquiring about it, in addition to the indication of the disappointment of the Muslim individual with the contesting wrestlers, reveal a new trend towards Islam, and all in all they reflect an Islamic consciousness which has begun crystallizing and taking various intellectual levels in the minds of many people, each according to the extent of his readiness and degree of response to Islam.
The seeds of an Islamic consciousness manifest their existence in the minds of a large number of people on the level of raising questions about Islam, in the minds of others on the level of an emotional inclination towards it, and in yet other minds on the level of believing in it and in its rightly-guided leadership, in all spheres; it is their very belief in life itself.
Islamic consciousness, which is stirring now in the minds of the Muslim nation on various levels, is the one that once laid the question, and inspired the answer in favor of Islam. On other occasions, it was embodied as a giant conscious belief planted in the right soil of the nation’s minds, the soil that represents Islam among Muslims.
On the other hand, the Islamic faith itself forces Muslims to lay this question down to the faith or to its ‘ulema (theologians) who represent it, asking them to provide the better substitute for both contesting opponents, capitalism and Marxism. Islam declares very clearly in the Holy Qur’an, in the legislative texts of the Shari’a, and through all other vehicles of media at its disposal, that it opposes both capitalism and Marxism.
Naturally, it is responsible for defining a positive situation, besides that negative one, to lead us to another path with whose viewpoint and general structure it agrees. The negative attitude, when separated from a constructive response which outlines its objectives and defines its pathway, means the retreat from life’s battlegrounds and the final social disintegration, not merely subscribing to a new ideology.
Since it does not approve to be included within the frameworks of capitalism, socialism and Marxism, Islam, then, has to provide an alternative, or at least lead us to one. It becomes only natural for Muslims, who have come to know Islam’s negative attitude towards capitalism and Marxism and its disapproval of them, to inquire about the extent of Islam’s might and ability to provide this alternative, and the extent of success which we may attain if we are to be satisfied with Islam itself, inspired thereby to derive an economic system.
Our answer to all of this is: Islam is capable of providing us with a positive stance rich in legislative characteristics, general outlines and detailed canons from which a complete economic system can be formulated, one which differs from all other economic doctrines in its Islamic framework, divine link and harmony with humanity, all humanity, in its spiritual and materialistic spheres and dimensions of both time and place.
This is exactly what we shall witness in the forthcoming researches.
What Sort of Islamic Economic System is it?
What do we mean by saying that there is an economic system in Islam? What is the nature of the Islamic economic system about which we inquired at the beginning of this study, emphatically asserting its existence and our belief therein?
This is exactly what we have to start explaining before anything else because when we claim that there is an economic system in Islam, we cannot seek to confirm such a claim unless it is defined and made comprehensible, and unless we explain to the reader the meaning which we render to this “Islamic economic system.”
We mean here the economic doctrine, not the science of economics. The Islamic doctrine is but an attempt to seek a method which is compatible with a certain concept of equity in order to regulate the economic life accordingly.
By using the term “Islamic economic system,” we do not necessarily refer to any particular scientific research in economics. This sort of definition of the Islamic economic system enables us to face the challenge of differentiating between the “economic doctrine” and the “science of economics.”
As long as the Islamic economic system is an economic doctrine, not a science of economics, we must know with more clarity the meaning of the economic doctrine as well as that of the science of economics: What are their differentiating characteristics? If this is not made clear enough by illustrations, the identity of the Islamic economic system will remain shrouded with ambiguity.
When we, for example, describe someone as being an engineer, not a physician, we have to know the concept of “an engineer”. What is his function? What is his education? What sort of job does he do? What is the difference (in function) between him and, say, a physician?
Only when we know the answers to all these questions can we for sure be able to ascertain the truth of the description of that individual and of his truly being an engineer, rather than a physician, etc.
Also, when it is said that the Islamic economic system is an economic doctrine, not a science of economics, we must understand the general concept of the economic doctrine as a whole and the function of the economic creeds, the nature of their formation and the differences between the economic doctrine and the science of economics, so that we may be able to know, in the light of all of this, the identity of the Islamic economic system and the fact of its being an economics creed rather than a science of economics.
In my judgment, the clarification of the identity of the Islamic economic system must be based on a complete differentiation between the economic doctrine and the science of economics, and on the realization of the fact that the Islamic economic system is a doctrine, a creed, not a science.
Such a clarification will help us a great deal in putting forth the claim that there is an economic system in Islam, and it undermines the premises upon which those who deny the existence of an economic system in Islam stand, exposing their confusion in this regard.
Upon this basis we shall attempt to conduct a general study of the economic doctrine and the science of economics, and the differences between them both.
Economic Doctrine and the Science of Economics
Each one of us faces two sorts of questions in his everyday life and realizes the difference between them: For example, when we want to ask a father about the conduct of his son, we may ask him, “How should your son behave?” Or we may ask him, “How does your son actually behave?”
When we put forth the first question to the father, asking him how his son ought to behave in life, he will naturally derive his answer from the principles, ideals and objectives he holds as sacred and puts to practice. He may say, “My son ought to be brave, courageous, ambitious,” or he may say, “He ought to be a true believer in his Lord, self-confident, ready to sacrifice his all for the sake of attaining righteousness and a sound belief.”
But when we ask the same father the second question, in which we inquire about his son’s actual behavior in life, he will not refer to his own principles and ideals in order to provide his answer; rather, he will answer it in the light of his own observations of his son’s conduct. He may say, “He is behaving loosely, trading in his faith and is a coward when faced by life’s problems.”
The father derives his answer to the first question from the principles and ideals in which he himself believes, while he derives his answer to the second question from his own observations and evaluation of his son’s conduct in life’s arena.
We can use this example to explain the difference between the economic doctrine and the science of economics. In the economic life, we are encountered by two distinct questions, like the ones the father encountered when asked about his son’s conduct; therefore, we may once ask: “How should the events go on in the economy’s life?” while we may ask: “How events are actually going on in the economy’s life?”
The economic doctrine deals with the first question; it answers it, deriving the answer from the principles and ideals in which it believes and from its concepts of justice, just as the father derived his answer to the first question from his own principles and ideals.
The science of economics, on the other hand, deals with the second question: It answers it as inspired by observation and experience. Just as the father answers the second question, basing his answer on his own observations of his son’s conduct and on his experience with it, so does the science of economics fare: It explains the events of the economic life in the light of observation and experience.
Thus do we come to know that the science of economics discovers what actually occurs in the economic life of social and natural phenomena, discussing their causes and interrelations. The economic doctrine evaluates the economic life and outlines how it ought to be according to its own concepts of equity and the equitable method for regulating it. Science discovers, while doctrine evaluates. Science talks about what is already in existence and the reasons for its existence; a doctrine discusses what ought to and ought not to be.
Let us start with the illustrations which distinguish between the function of science and the role of the doctrine in discovering and evaluating:
The First Example
Let us take the example of the link between the market price and the degree of demand: We are all aware, from our everyday life observation, of the fact that when a commodity is more in demand and the public’s desire to purchase it is increasing, its price will rise. If we author a book in, say, mathematics, and it is sold for ¼ dinar, and if the ministry of education decides to use it as a school textbook, and if the students’ demand for it increases, its market price will accordingly increase. So is the case with all other goods: Their prices are linked to the degree of market demand; when demand increases, price, too, will increase.
This link between price and demand is included in the calculation of both science and doctrine; but each treats it from its own particular angle. The science of economics studies it as a phenomenon which takes shape and is found in the free market, the market that is free of enforcement of pricing restrictions on goods by a higher authority such as the government.
It explains how this phenomenon takes shape as a result of the market’s freedom, and it finds out the extent of the link between the price and the degree of demand. It explains whether the link between the price and the degree of demand is the same for all goods, or whether only some prices are affected when they are more in demand than others.
All of this is studied by science for the purpose of discovering all facts related to the phenomenon of the link between price and demand, and it explains what happens in the free market as the outcome of its own freedom, explaining all of that scientifically on the basis of methods of scientific research and regular observation.
In all of this, science does not add anything to the reality of the matter; rather, its main objective is the forming of a precise idea about what actually takes place, what phenomena result in the free market, and what relations exist among such links, the coining of laws which express such links, reflecting the exterior reality in the best possible and precise exactness.
As regarding the economic doctrine, it neither studies the free market in order to discover the outcomes of such a freedom and its effects on prices, and how the price is linked to the degree of the free market’s demand, nor does it take upon itself to wonder why the price of a commodity in the free market increases when it is more in demand.
The doctrine does not do anything like that. It is not supposed to. It does not have the right to do so either because the discovery of the causes and effects, the shaping of realities into general laws which reflect and copy it, is the privilege of the science in whatever it possesses of means of observation, experiment and deduction.
This doctrine deals with the freedom of the market in order to evaluate such freedom and the results to which it leads and whatever happens to be the outcome of linking the price to the degree of demand which invades the market. What we mean by the evaluation of freedom and of its outcomes is to judge it according to the doctrine’s own concept of equity, as each economic doctrine has its own general concepts of equity, hinging its evaluation of any line of the economic life on the degree of capability such line embodies of equity according, of course, to the doctrine’s concepts thereof.
The freedom of the market, for example, when researched in the light of the doctrine, will not be dealt with as a de facto phenomenon which has its outcomes and scientific laws; rather, as an economic system which requires the testing of its own degree of equity.
The questions “What are the outcomes of the free market? How is the price linked therein to the demand? Why should each be linked to the other at all?” are all answered by the science of economics.
The questions “How should the market be? Does its freedom guarantee a fair distribution of goods and the fulfillment of needs in the manner enforced by social equity?” are all answered by the economic doctrine.
Accordingly, it is wrong to expect any economic doctrine to explain to us the extent of link between price and demand in the free market, and the laws of availability and demand economists discuss while studying the nature of the free market.
Second Example
According to David Ricardo (1772 – 1823), if laborers’ wages were free from any interference of a higher authority, such as a government officially controlling them, they would remain slightly above the level that would only sustain the laborers. If they increase above such a level, it would only be temporarily; soon they will go back to their sustaining level.
In his explanation of this theory, Ricardo says that if laborers’ wages increase above the minimum sustaining level, it would only be temporarily; soon they will go back to their sustaining level. In his explanation of this theory, Ricardo says that if laborers’ wages increase above the minimum sustaining level, they will lead to the laborers’ increase in number due to the improvement in their living conditions, marriage and reproduction.
As long as the laborers’ job is a commodity in the free market, where wages and prices are not restricted, it, too, will be subject to the same rule of availability and demand. If laborers increase in number, and the availability of jobs in the market is plentiful, their wages will decrease accordingly.
So, whenever prices increase above the level of subsistence, there will be factors which would once more force their decrease and return to their destined limit. When they decrease below such a limit, laborers’ misery results; disease and death will prevail on them till their number decreases. When their number decreases, their wages will increase and go back to the level of subsistence because when there is a shortage and scarcity of a commodity, its price will rise in the free market. This is what Ricardo terms “the iron law of wages.”
In such a “law”, Ricardo discusses what actually takes place if there is a free labor market, discovering the stable level of wages within such a market, and the social and natural factors which interfere to fix and maintain such a level whenever the wage is liable to increase or decrease exceptionally. In fact, in his discussion of such a law, Ricardo answers the questions “What actually happens?” not “What should happen?” Because of this, his research enters the precincts of the science of economics, as it aims at the discovery of what events actually take place and what laws govern such events.
The economic doctrine, on the other hand, when dealing with laborers’ wages, does not aim at the discovery of what actually takes place in the free market. Rather, it finds out a method to regulate it, one which agrees with its own concept of equity. It discusses the basis on which wages ought to be regulated, researching the possibility of whether or not the principle of economic freedom fits to be the basis to regulate wages according to its own concept of equity.
Thereupon, we do not consider the function of the economic doctrine to be anything other than the definition of how the market ought to be regulated, according to its own concept of equity: Should it be regulated according to the principle of economic freedom, or on some other basis?
The science of economics studies the already-regulated market, basing its study on the principle of economic freedom, for example, in order to be acquainted with what events take place at the regulated market according to the same principle, how prices of commodities therein are fixed, how the laborers’ wages are restricted, and how they increase or decrease. In other words, science discovers; doctrines evaluate and judge.
Third Example
Let us take the third example of production, and let us define the angle from which the science of economics studies production according to the economic doctrine, so that we may be able to differentiate between both angles.
The science of economics studies the general methods of production which help the growth of production such as the distribution of labor, specialization, etc., comparing, for example, two projects which produce, say, wrist watches; each project contains ten laborers. Every laborer in each project is required to produce one watch. In the other project, labor is distributed; each laborer is entrusted to carry out one single step of the operation required to make the watch.
He repeats this sort of operation continuously, without participating in any other operation the watch has to go through during the manufacturing process. The scientific research in economics studies both of these projects, their relevant different methods, and the effects of each on production and on the laborer himself.
The science of economics also studies everything related to the economic production of natural laws, such as the law of the reason behind crop underproduction in agriculture which says that the percentage of increase in agricultural output of the land is less than that of its expense.[1] The science of economics studies all of this because it shows the discovery of facts on the economic level, as they take place, defining the factors which naturally affect production positively or negatively.
As regarding the doctrine, it deals with the following issues: Should production remain free, or should it be subjected to a central planning by the State?
Should the increase in production be regarded as an essential objective, or should it be seen as a means towards a higher end?
If the increase in production is considered as means towards a higher end, what are the limits and frameworks enforced by the nature of that "higher end" on such means? Should the production policy be the basis for the regulation of distribution, or is it the other way around?
In other words, which one of them ought to be regulated for the sake of the other? Shall we regulate the distribution of wealth in the manner which would make production plentiful and help its growth, so that the production’s interest would be the basis for distribution?
If the national interest requires the legislation of interest on commercial bonds in order to attract capital to the fields of production, should certain measures be undertaken in this regard and the distribution regulated according to the recognition of the capital’s rightful share of the interest, or should we regulate the distribution of wealth according to the requirements of an equitable distribution, limiting production by methods and means which would agree with the requirements of an equitable distribution?
All of this is included within the limits of the economic doctrine, not the science of economics, because it is linked to the regulation of production and to how its general policy should be structured.
Conclusion Derived From Previous Examples
From the previous examples, we can draw distinct lines between the science and the doctrine: the line of discovery and acquaintance with the secrets of the economic life and its various phenomena, and the line of evaluation and the discovery of ways to regulate the economic life according to certain concepts of equity.
Upon such basis can we distinguish between the scientific ideas and the doctrinal ones. The scientific idea revolves round the discovery of the reality, as it is, in an attempt to get acquainted with its causes, results, and links. It is like a scientific magnifying glass for the economic life. Just as one puts glasses on his eyes (for a better vision), he aims at seeing the reality, without adding to it or changing anything in it, so is the case of the scientific mode of thinking which assumes the role of laws and links. The general stamp of the scientific idea is “discovery”.
As regarding the doctrinal idea, this is not a mirror that reflects the reality. Rather, it is a particular evaluation of the situation in the light of the general concept of the reality. The doctrine says: “This is what should actually take place.”
Science of Economics and Doctrine: History and Ethics
The difference which we have scrutinized between the science of economics and the economic doctrine, that is, between researching what already is and what ought to be, is similar to that between the science of history and the ethical researches. In its general policy, the science of history agrees with the science of economics. In the process of evaluation and assessment, the policy of ethical researches is similar to the economic doctrine.
People generally agree on making a distinction between the science of history and the ethical researches. They know that historians tell them, for example, the reasons which led to the downfall of the Roman Empire at the hands of the Germanic people, and the reasons which caused the crusades to erupt against Palestine and the failure of all of those crusades, the circumstances which contributed to the assassination of Julius Caesar while enjoying the zenith of his victory and glory, or those that led to the murder of and revolution against Othman ibn Affan, etc.
History studies all of these events, discovering their causes and interrelations to each other, the results they brought forth and the developments in various fields. As a science, it confines itself to scientifically discovering such causes, interrelations and results; it does not evaluate events ethically.
Within its scientific scope, history does not judge Caesar’s or Othman’s assassination to be ethically “right” or to be deviated from lofty moral ethics of conduct. Nor is it its job to evaluate the crusades or the invasion of Rome by the Germanics as being “just” or “unjust”.
The evaluation of all of these events is linked to ethical researches. In the light of the ethical criteria of deeds can we judge, from the ethical viewpoint, that this deed is just or unjust, or that a certain norm of behavior is straight or crooked, deviated…, or whatever.
Just as the science of history describes a conduct or an event as it took place, the ethical researcher comes later on with his general criteria to evaluate; so does the scientist of economics describe the events of the economic life, and the promoter of the economic doctrine comes later on to evaluate such events, defining the method on whose bases the economic life has to be regulated, all in accordance to the general concepts of justice and equality each one of these upholds.
Economics is Similar to any other Science
What we have said, while discussing the function of the science of economics—indicating that it is confined to discovery alone, rather than to evaluation and assessment—is not restricted only to the science of economics. The basic function of all sciences is discovery.
There is no difference between the economists and physicists, nuclear scientists, astronomers, psychologists, etc. except that the first perform their function in man’s economic field while the others perform this one: the discovering of facts, the latter’s interrelations and the laws governing their various fields of external physical nature, or of the human nature.
The scientist researches natural physics, for e.g., studying various speeds of light, sound and other such matters, discovering their precise equations. The scientist deals with the atom, that is to say, the nuclear scientist studies the atom’s structure, the number of its electrons and neutrons, and the laws governing its movement. The astronomer studies the large planets in the cosmos and the laws that regulate their orbiting. The psychologist studies mental vision, its psychological implications and the elements which affect it.
From his own particular angle, the economist discovers the laws of economic phenomena, whether or not they are natural, such as the phenomenon of crop underproduction, or social, such as the phenomenon of the rise or fall of prices in the free market according to the degree of demand. All of these, scientifically speaking, are discoveries, not evaluations.
Difference is in Function, not Label
In the light of what has passed, you have come to know the fact that the difference between the science of economics and the economic doctrine stems from their difference in function. The function of the science of economics is to discover the economic phenomena and their interrelations, while the function of the economic doctrine is to find a way to regulate the economic life as it should be according to its own concepts of equity.
Upon such a basis, we realize the error of the attempts that aim at subjectively differentiating between the science of economics and the economic doctrine by simply saying that the science of economics deals with production and its laws and the elements which help its growth, while the economic doctrine deals with distribution, its regulations and the interrelations which rise among the society’s individuals on its basis.
Such attempts are wrong because we have already seen from the previous examples—which we provided in order to differentiate between the science and the doctrine—that the economic doctrine deals with both production and distribution (refer to the third example above), whereas the science of economics deals with both distribution and production (refer to the first and second examples above).
The “iron law of wages,” as the second example explained, is a scientific law in spite of its relevance to distribution and the regulation of production. Based on economic freedom, or the basis of a central state supervision, it is considered as one of the issues of the doctrine in spite of its being a research in production.
It is wrong, therefore, to judge a research that deals with production as being “scientific,” while labeling it as “doctrinal” if it deals with distribution. The distinguishing mark between the scientific research and the doctrinal one is the relationship such a research has with either the world of reality or with that of justice and equity.
If the research deals with the economic life as it is in the world of reality, then it is “scientific,” but if it searches for justice and for means to effect such justice, then it is “doctrinal.” In other words, the link between the concept and the “injustice” is the general mark of the doctrine which differentiates it from the scientific researches contained in the science of economics.
Doctrine may be a Framework for Science
We have so far come to know that just as the science of economics deals with production, discovering the crop underproduction law, for e.g., it also deals with distribution, discovering a law such as that of the “iron law of wages.”
In spite of all of this, however, there is often a difference between the scientific research that deals with production and that which deals with distribution. Let us take the law of the crop underproduction and the iron law of wages as examples: The first law represents the scientific research in production; the second represents the scientific research in distribution.
If we study the crops underproduction law, we will find it to include one fact about agricultural production applicable to land in every human society, regardless of its economic doctrine. Land in the capitalist society, according to that law, decreases in producing crops in the same manner it does in the Socialist or Islamic society. This means that the crops underproduction law is not confined to the situation of one particular doctrine; rather, it expresses an absolute scientific fact.
As regarding the iron law of wages, which we explained in the second example, it discovers, as we have already seen, the fixed level of laborers’ wages in a society that enjoys economic freedom. It concludes by stating that in a society wherein freedom dominates, laborers’ wages always remain on the level of subsistence. If they rise or fall, for any reason whatsoever, they always go naturally back to that same level.
This law is scientific in nature, context and objectivity because it tries to discover the reality and to get acquainted with the movement and direction of wages as it takes place in the society. At the same time, it decides that such a fact is true only in the capitalist society in which economic freedom prevails, and it is not applicable to the society which is economy-geared (to a certain direction), one wherein the government enforces restrictions on wages.
Capitalistic freedom is a precondition for the applicability of this scientific iron law of wages, that is to say, it is its general frame within the range of which the iron law of wages is also applicable. This means that the law’s context is scientific, and its general framework (which precludes its application) is doctrinal.
Most likely, the inability to distinguish between the context and the frame, or between the scientific law and its conditions, led to the claim that all distribution laws are doctrinal, and that science does not have to research distribution. Preconditioning a certain doctrinal frame for the scientific laws of distribution made those who put forth such a claim imagine that those laws are doctrinal in nature.
Derived Conclusions
From the above, we reach these conclusions:
First: The science of economics and the economic doctrine differ in their basic function: The function of science is the discovery (and analysis) of the economic life and its phenomena as they exist in the world of reality, while the function of the doctrine is to find a way to regulate the economic life as it ought to be, according to its general concepts of equity. Science, therefore, tries to embody reality, while doctrine tries to embody equity.
Second: The science of economics deals with both production and distribution, while the economic doctrine deals with both production and distribution, and there is no basis for distinguishing between them (between the science and the doctrine) on the basis of the subject-matter by making production the concern of science while assigning distribution as the concern of the doctrine, because science and doctrine differ only in the task and method of research, not in the subject-matter.
Third: The laws of the science of economics, regarding production, express fixed facts applicable to various societies regardless of the economic doctrine they follow. As regarding the laws of the science of economics in distribution, these are conditioned to a certain doctrinal frame; that is, the economist preconditions the existence of a society which practices a certain kind of doctrine like capitalism and of economic freedom, then he tries to discover the laws and economic life of such a society.
Doctrine Does not Apply Scientific Methods
From the previous analyses of both doctrine and science, we have come to know that the doctrine's function is to express the demands of justice, while science assumes the responsibility of discovering the economic events, as they occur, their causes and interrelations.
This difference in the basic function necessarily requires their difference in the methods of research. This means that the science of economics, as such, discovers what occurs in the world and in the society of everything related to the economic life, using the scientific methods of observation and experiment, monitoring the events the economic life is full of in order to derive, in their light, their interrelations and general laws.
Whenever there is a case to doubt, and the extent of its truth and reflections of reality are not known, the economist is capable of referring to the scientific criteria and to his own well-organized observations of successive events in order to discover the extent of the truth of such case and of its being a true reflection of the reality.
Both economist and naturalist are on the same footing in this aspect: When the naturalist desires to find out the degree at which water boils, he can scientifically measure the water’s temperature as a natural phenomenon, observing the temperature when boiling starts.
When the economist desires to discover the sequence of famous crises which inflict the human society from time to time, he has to refer to the events of the economic life as they happened successively in order to determine the historical dividing line between one crisis and another. If he finds such a line to be the same in all crises, he will be able to define the cycle of such crises and in the end look for their causes as well as the factors that affect them.
Contrariwise, the economic doctrine cannot measure the subjects it deals with scientifically because it studies such subjects from the angle of equity and justice, trying to find a regulation method according to the demands of justice and equity.
Obviously, justice is different from the water temperature and boiling degree, and it is different from the economic crises and cycles, because the latter are not cosmic or social phenomena which can be observed subjectively or measured scientifically through the well-known means of experiment in the world. In the economic doctrine, it is not sufficient to look at facts and observe events scientifically in order to know what equity is in organization, as is the case with the economist who studies economic crises in order to know their cycle and code.
Let us take the issue of equity in distribution as an example: There are some people who say that equity in distribution is achieved in the shade of a system that guarantees equality among all members of the society during austerity as well as during prosperity, and there are others who consider equality of freedom among the members of the society, instead of equality in sustaining them, to be the just basis for distribution, even if individuals practice their free right to variations in sustenance and the increase of the wealth of some over that of others, as long as they all enjoy the same freedom granted equally to each and every one of them.
There are also others who see that the equity of distribution is achieved through guaranteeing a general level of sustenance to all people, while granting them freedom outside the limits of such level, as does Islam.
Can equity of distribution be achieved? Is it equality in subsistence and wealth that matters, or is it the granting of everybody the freedom to practice various norms of economic activity, while limiting each person’s share of subsistence according to the way he practices such freedom? Or is it according to a third method that lies between this and that?
If we want to know the answers to these questions, and to know the approach and concept of equity in as far as these means are concerned, we cannot use science to reach our objective simply because equity is not an external natural phenomenon like temperature or boiling which we can measure by applying our vision or touch or the rest of our physical senses, nor is it a social phenomenon such as economic crises in the capitalist society in order to be evaluated, observed and tested.
Science can surely assess individuals in order to determine the extent of their similarity or dissimilarity in physical or psychological features in order to decide whether it is fair to equate all of them in subsistence or not. Justice and truth are not subjective qualities that can be measured by science or by the senses in the way all bodily or natural phenomena are measured, felt, viewed, etc.
Take the example of the capitalist who believes that people are equal in their right to enjoy freedom even if their shares of subsistence vary, and the socialist who believes that all people are equal in their right to be sustained, and ask both of them this question: “Is there a thermometer for justice like the one for measuring temperature so that I may be able to know the degree of justice in a society where people’s shares of freedom are equal even when their shares of wages and subsistence vary?
Are the ‘rights’ enjoyed by the members of society a natural phenomenon which can be felt as we can feel their own colors, heights, intelligence, voice, etc., in order to study such rights through the use of scientific methods based on the senses or the experiment?”
The answer, of course, to these questions is a plain “No.” Equity has no thermometer because it is not a phenomenon that can be realized through the senses or through observation; nor is the right of people to achieve it one of their own characteristics such as height or intelligence so that we may apply science to determine such right.
The conclusion we draw from this is that as long as it studies the issues from the angle of equity and truth, the doctrine can derive the method it prefers to use in regulating the economic life from its own concepts of equity, from the principles and ideals in which it believes, or from its general attitude towards life.
The Islamic Economic System We Advocate
I believe that the previous research suffices to help us form an outlined concept of what the economic doctrine is all about and its relevance to the science of economics, the function of each, as well as the methods of research each applies. For this reason, we can now explain the nature of our concept of the Islamic economic system, what we mean when we emphasize the existence of economics in Islam, or when we refer to the Islamic economic system.
Islamic economics, as we have come to know at the onset of this research, comprise an economic doctrine, not a science of economics. When we say, “Islam produced an economic doctrine,” we do not claim that Islam invented the science of economics. Islam did not come in order to discover the events of the economic life, its interrelations and causes; this is not its responsibility.
Nor is it responsible for uncovering for people natural laws, the cosmic phenomena, their interrelations and causations, etc. Just as religion does not necessarily have to contain astronomy and natural sciences, by the same token, it does not have to contain the science of economics.
Islam incorporates a system for regulating the economic life rather than for discovering one, and a system to provide the structure within which it has to be regulated, all in accordance with its own concepts of justice and equity. The Islamic economic system represents the Islamic viewpoint of equity and its method for regulating the economic life. It does not unveil scientific discoveries regarding the links and interrelations of the economic life as they actually take place. This is the meaning of saying that the Islamic economic system is a doctrine, not a science.
In other words, if Islam had come in order to narrate to us about the economic life in Hijaz (where Islam had set roots), and the reasons which cause the Hijazi society, for e.g., to increase the interest rate the lenders receive, then such a narrative would be scientific, one which deals with the science of economics.
But, instead of this, Islam has come to evaluate and consequently prohibit such an interest, regulating the relationship between capital and the project’s owner upon the basis of contracting instead of usury and interest; hence, Islam adopts the doctrinal position, not the scientific one.
When we clearly get to know the nature of Islamic economics to be an economic doctrine, not a science of economics, we can easily remove the largest obstacle in the way of believing in the existence of economics in Islam.
What are the Greatest Obstacles?
The greatest obstacle on which many people rely in rejecting the concept of the Islamic economic system stemmed from the latter’s inability to distinguish between the science of economics and the economic doctrine.
Whenever those who have not had the opportunity to differentiate between the science and the doctrine hear someone saying that there are economics in Islam, they soon retort: “How can there be economics in Islam when we cannot find researches by Muslim economists on par with Adam Smith, David Ricardo, and others?
Islam did not tell us anything about the law of crop underproduction, nor the laws of availability and demand, nor has it brought forth a law similar to that of the iron law of wages, nor has it produced a theory regarding the analysis and scientific study of the value as was done by the scientists of economics.
How can we be required to believe in the existence of ‘Islamic economics’ when we all know that the researches in the science of economics were born and brought up to perfection during the last four centuries at the hands of the early pioneers of economics such as Adam Smith and those traders and naturalists who preceded him?”
Those who deny the existence of Islamic economics say all of this, assuming that we claim that Islam conducts scientific researches in economics.
Having come to know the difference between the science of economics and the economic doctrine, and that the Islamic economic system is a doctrine, not a science, there remains no need for the above stated denial to exist because the existence of the economic doctrine in Islam does not mean that Islam discusses for people the laws of availability and demand. Rather, it simply means that Islam has called for a distinct regulation of the economic life, defining the bases and pillars upon which such life has to stand.
The belief in the existence of Islamic economics in this light seems plausible rather than odd.
We will not start in this series (of “The Islamic School”) the study of the details of Islamic economics. When we study such details in the forthcoming series, Insha-Allah, we will provide you with the concrete proofs, from the Holy Qur’an and the Sunnah, for the existence of the doctrine in Islam. There is no proof for the existence of a thing better than bringing it before the senses, and this we intend to do in the forthcoming series, Insha-Allah.
Now, before we provide the proofs for the existence of the Islamic economic doctrine, and be acquainted with the places in the Holy Qur’an and Sunnah where it can be derived, we want to provide the proof for its existence from the nature of the Islamic Shari’a [legislative system] and our prior comprehension thereof.
Inclusion and Absorption of Shari’a
The inclusion of Shari’a and absorption of all fields of life is one of its own fixed characteristics, not only through following its tenets in such fields, but also in emphasizing this fact in its general sources of derivation, too. We can find, in many such sources, texts which clearly emphasize the absorption of such Shari’a of and extension to all fields lived by man, and also of its being rich with its solutions for all problems in his path in various fields.
Observe these texts:
1) Abu Busayr, through the authority of Imam Ja’far al-Sadiq (ع), narrated saying that the Imam talked once about the inclusion and absorption of Shari’a, and the knowledge of the Family of the Prophet (ص) of all of that, saying, “It has the details of everything permissible and prohibited, and everything which people need to know, even the fine to be paid for the extremely tiny cut on one’s cheek.” Then he clasped his hands and said, “Do you permit me, O Abu Muhammed?” Abu Busayr answered, “May my life be sacrificed defending yours! I am yours to do whatever you please.” The Imam (ع) stretched his hand to the latter’s cheek, slightly pinched it then said, “Even your [facial] cut this!”
2) In Nahjul-Balagha, the Commander of the Faithful Ali ibn Abu Talib (ع), describing the Messenger of Allah (ص) and the Holy Qur’an, said: “He (the Almighty) sent him (Muhammed) after a long period of time which had lapsed since a messenger was sent, and when the nations were sleeping sound, slighting even that who had a grievance. He came to testify (in his own personal conduct) to the truth which he brought forth, the light of guidance, the Qur’an! Ask it to speak; but it will not speak to you (since you do not belong to Ahl al-Bayt); but I can tell you about it: It contains news of the future, tales of the days of yore, the remedy for your ailments and the final judgment in your disputes.”
All of these texts clearly emphasize the inclusion of the Shari’a of all aspects of life. If the Shari’a contains the solution for even the most trivial problem, such as the amount of monetary compensation to be paid by one who slightly pinches or scratches the facial tissue of another’s cheek, then it becomes necessary, according to the logic of such texts, that the Shari’a also contains the solutions for the economic problems, and a method to regulate the economic life; otherwise, how can it be called “inclusive” if it were to neglect one of the most significant and spacious aspects of life, one of its most important and complicated facets?
Can you imagine that the Shari’a, which determines the amount of compensation you should receive when someone very slightly scratches your skin, does not define your share of the produced wealth, nor does it regulate the contract between you and your employer, or with the capitalists, in various jobs which require an employee or a capitalist?
Is it conceivable that the Shari’a defines your right when you are very slightly cut while it does not do so when you bring life back to a barren land or extract a mineral or dig a well or take care of a forest?
Thus do we come to know that anyone who believes in the Shari’a and in its sources and texts is capable of deriving from such texts the solutions such Shari’a provides for the economic problems, its regulating of the economic field and, in the end, the existence of an Islamic economic system extracted from the Holy Qur’an and Sunnah.
In the light of these texts, the reader can come to know the error committed by some people who claim that the Shari’a regulates the conduct of the individual, not the society, and that the economic doctrine is a “social system”; therefore, it is beyond the limit of the Shari'a which confines itself to regulating the conduct of only the individual. The texts quoted above prove that such a claim is erroneous. These texts disclose the extension of the Shari'a to all fields of life, and that it regulates the life of both society and individual.
In fact, the claim that the Shari'a regulates the individual's conduct and not the society's is self-contradictory besides colliding with those texts because if both the individual's conduct and the regulating of this conduct are studied separately from those of the society, a grievous mistake will then be committed. The social system, which regulates the society's general aspects, be they economic or political, is embodied in the individual's own conduct; it is impossible to regulate the individual's conduct without regulating the society in which he lives.
Take a look at the capitalist system: As a social system, it regulates the economic life upon the basis of taking free economy as its principle. Such a principle is embodied within the conduct of the capitalist towards the laborer, and his way of making a work contract with him, in the conduct of the usurer with his customers whom the first lends the latter money on interest basis and in the way he conducts the interest contract with them, etc. Every social system, therefore, is linked to and directly affects the individual's conduct.
If the Shari'a regulates the individual's behavior, it, thereupon, has its own method in regulating his conduct when borrowing some money, or hiring a laborer, or working for someone else, and all of this is by necessity linked to the social system. Any separation between the conduct of the individual and that of the society in organization is certainly self-contradictory.
As long as we admit the fact that the Shari'a regulates the individual's conduct, and that it has a say in every act of man, as long as we admit all of this, we then have to carry such an admission to its conclusion and come to believe in the existence of a social system within the Shari'a.
I do not know what those who disbelieve in the existence of the Islamic economic system, or of the solutions to the economic problems in the Muslim society, say about the period of such an application during the dawn of Islam. Did not Muslims at the dawn of Islam live as a society that led an economic life and applied Islam in all its social activities? Was not the leadership of the Islamic society in the hands of the Prophet (ص) and according to the tenets of Islam?
Did not that leadership possess defined solutions in dealing with its problems of production and distribution and various other economic problems? What if we claim that these solutions express Islam's way in regulating the economic life and, then, an economic doctrine in Islam?
If we conceive the Islamic society during the government of the Prophet (ص), we cannot conceive it as lacking an economic system, because there is no society in the world without its economic system which regulates its economic life and the distribution of wealth among its members.
We cannot conceive the economic system during the period of the Prophet (ص) to be separated from Islam and from the Prophet of Islam (ص) who was the bearer of the Message and was entrusted with putting it to practice. The economic system, then, had to have been derived from his sayings, actions, or edicts; that is, it was derived from the texts of his sayings, actions, or methods in regulating the social work, since he was the Head of the State, or from his recognition and approval of a custom, or whatever. All of this stamps the economic system with its own Islamic stamp.
Doctrines Need Molding
When we discuss the existence of an Islamic economic system, or an Islamic economic doctrine, we do not mean that we will find (directly in these texts) the same basic theories of the Islamic economic doctrine, in their general formulas. Rather, the texts and sources of legislation provide us with a large number of legislations which regulate the economic life and the relationship between man and his brother man in the fields of production, distribution and handling, such as Islamic codes regarding farming, mining, leasing, contracting, usury, zakat, khums, taxes and State treasury. This collection of canons and legislations, when organized and comparatively studied, will lead us to their own sources and to the general theories which we indicate here. It is from such theories that we can derive an economic doctrine in Islam.
It is not necessary, for example, that we should find within the texts and sources of Shari'a a common formula for the definition of a principle which agrees with or is similar to the principle of economic freedom in the capitalist system. But we can find within such texts and sources a number of legislations from which we can derive Islam's stance towards the principle of economic freedom and through which we can find the substitute for such a principle from the Islamic viewpoint.
Islam's prohibits capitalist usurious investment and land possession without utilization or farming as well as granting a man of authority a prerogative to regulate the pricing of goods [as he pleases]. All these are examples testifying to our argument. They form our view regarding Islam's stance towards the economic freedom, and they reflect the general Islamic principle.
Ethics of Islamic Economics
Someone may say, "The economics you claim to exist in Islam do not comprise an economic doctrine but an ethical code the religion (of Islam) provides as guidelines which Islam exhorts people to follow. Just as Islam enjoined the prohibition of deception and backbiting, etc., it also enjoined helping the poor.
It prohibits injustice, admonishes the rich to console the needy, forbids the strong from confiscating the rights of the weak, and warns the first against earning their wealth through illegal means. It also imposes a mandatory rite, among others, called zakat. It imposes it besides prayers, pilgrimage and the fast in order to make a variety in the means of worship, and to emphasize the necessity of helping the poor and being generous to them.
"All of this has been done by Islam in accordance with a general ethical procedure, and these injunctions, pieces of advice and directives are no more than ethics which aim at the growth of the good energies within the Muslim individual's own self, and to tie him closer to his Lord as well as brother man. They do not imply an economic doctrine or the level of a generally inclusive organization of the whole society.
"In other words, the above stated injunctions, which have an individualistic ethical nature, aim at the individual's reform and the growth of goodness within him. They do not have a social organizational nature. The difference between the preacher who ascends the pulpit in order to admonish people to be kind and compassionate, to warn them against injustice, wrongdoing and trespassing on the rights of other, and like the social reformer who plans the sort of relations which have to exist among people, defining rights and obligations."
Our answer to all of these arguments is as follows: The facts about Islam and its economics do not agree at all with such an interpretation which reduces the level of Islamic economics to that of mere providing counsels and ethical codes. It is true that the ethical trend is obvious in all Islamic tenets. And it is true that Islam contains a huge multitude of injunctions covering all spheres of life, the human conduct, and the economic sphere in particular.
It is also true to say that Islam has gathered the most fascinating means to ethically nurture the Muslim individual, help the growth of his good energies and bring out of him perfection personified. But this does not at all mean that Islam confines its teachings to ethically nurture the individual while setting social organization aside. Nor does it mean that Islam preaches only to the individual rather than being, in addition to this, a doctrine and an organization for the society in its various aspects of life, including its economic life.
Islam has not forbidden injustice, admonished people to be just, warned them against transgressing against the rights of others, without defining the concepts of injustice and iniquity, from its own viewpoint, or without outlining the rights not to be trespassed. Islam has not left the concept of justice, injustice and righteousness clouded with obscurity, nor has it left their interpretation for others, as do ethical preachers.
Rather, it has brought a defined image of justice and general rules of coexistence of people in the fields of wealth production, distribution and handling, considering any deviation from such rules and the justice it defines as sheer injustice and flagrant transgression on the rights of others.
This is the difference between the position of the preacher and that of the advocate of the economic doctrine. The preacher preaches about justice and warns against injustice, but he does not lay down the criteria for justice and injustice; rather, he leaves such criteria to the commonly followed customs, those that are recognized by both preacher and the congregation to which he preaches alike.
As regarding the economic doctrine, this attempts to put down such criteria and mold them into a well-planned economic system that regulates various economic fields.
Had Islam come simply in order to say to people, "Quit injustice! Practice equity! Do not be transgressors!"—leaving to them to define the meaning of "injustice," to draw the portrait which embodies justice and to agree on the rights required by equity according to their own circumstances, education and the ideals in which they believe and the interests and needs they realize.
Had Islam left all of this for people to determine, confining itself to enjoining justice and attracting people towards it, forbidding injustice and warning them against it through both methods of attracting and warning…, then it would have, indeed, remained a preacher and nothing else.
When Islam required the Muslims to quit injustice and practice equity, it at the same time provided them with its own definition of justice and injustice. It has taken upon itself to differentiate between the fair method in distribution, handling and production, and the foul one. It has indicated, for e.g., that forceful possession of land without tilling it is injustice, that maintaining it on the basis of utilizing it is "permissible," that the accumulation of wealth by acquiring a portion of the produced wealth in the name of "interest" is injustice, that its own achievement of profit is right, and many such relations and norms of behavior in which Islam has distinguished between injustice and justice.
As regarding Islam urging the rich to help their poor brethren and neighbors, it is true, but Islam did not confine itself to merely urging and ethically admonishing the rich; rather, it has imposed on the State the obligation to guarantee the securing of the rights of the needy, and to provide them with an honorable living standard in a way that falls into the backbone of the Islamic system which regulates the relationship between the ruler and the ruled.
According to the hadith narrated through the authority of Imam Mousa ibn Ja'far al-Kazim, peace be with him, the Imam mentioned, while defining the ruler's responsibility in faring with zakat, that he has to take this money in order to divide it in the way which God has ordained to eight shares to the poor and the needy, to distribute it among them till they become self-sufficient for an entire year without fearing any hardship or stringency.
If any amount of it is left, it will have to be returned to his treasury, and if it is not sufficient for the public, the ruler will then have to provide them from the treasury according to their needs and until they become self-sufficient.
It is clear, from this text, that the concept of security and the necessity to provide everybody with a dignified standard of living is not a preaching idea; rather, it is one of the ruler's own responsibilities in Islam; therefore, it falls into the social backbone and it expresses an aspect of the Islamic structure relevant to the economic life.
There is a big difference between the famous text of hadith which says, "One does not believe in God and in the Latter Day if he spends his night satisfied while his neighbor is hungry," and the text that says, "The ruler has to spend on them, each according to his need, until they all have enough." The first text has a preaching nature, while the second is organizational, reflecting, therefore, one aspect of the Islamic system. The latter cannot be seen except as part of a general social system in Islam.
Zakat is one of the most significant of all rites. Its use as a tool to implement social security in the Islamic society, as we have seen in the previous text, is alone sufficient to distinguish it from all other rites of an "individualistic" nature. This proves that it is not merely an individual form of worship, an ethical exercise for the rich to be kind to the poor; rather, it is on the level of social organization of people's way of life.
Add to this the fact that the very legislative structure of zakat expresses a general doctrinal aspect in Islam. The texts which deal with zakat indicate that the latter is given to the needy in order to improve their general standard of living. This proves that zakat is part of a general Islamic plan aimed at finding harmony and a generally unified standard of living for members of the Muslim society. It is obvious that planning for such harmony is not preaching but is an organizational ideology on the level of an economic doctrine.
Conclusion: What do Islamic Economics Lack?
I do not know why those who deny the existence of Islamic economics are so generous in granting the label "economic doctrine" to capitalism and socialism while being so stingy in granting the same to Islamic economics, preferring to term the latter as "a collection of ethical codes." We have the right to ask them, "What has made both capitalism and socialism worthy of being called economic doctrines which Islamic economics do not have?"
We can observe the fact that Islam has dealt with the same subjects as capitalism has, and on the same level, assigning to them injunctions derived from its own viewpoint which differs from that of capitalism. There is no justification at all, therefore, to say that capitalism is a doctrine while Islam is preaching, that is, an ethical code.
Let us provide you now with two examples which testify that Islam has provided its views on the same level the other economic doctrines have: The first example is related to ownership which is the focal point of difference among all economic doctrines. Capitalism considers private ownership as the rule, and general ownership as the exception.
This means that every sort of wealth, and every natural resource, allows private ownership unless there is a specific need that necessitates its nationalization which brings it out of private ownership.
Marxism considers common ownership as the basis and the rule, and no private ownership is allowed for any sort of natural resource or means of production unless there is a particular necessity which enforces the opposite; it is only then that private ownership becomes permissible, within the limits of the necessity, and as long as such necessity exists.
Islam, on the other hand, is different from both doctrines in its treatment of this subject. It calls for the principle of "combined ownership," that is, diversified ownership, considering both common and private ownerships to be on one and the same footing, each having its own scope.
Does not this Islamic attitude express an Islamic viewpoint on the doctrinal level of the capitalist and socialist positions? When the principle of private ownership makes a cornerstone of the capitalist doctrine, and the principle of common ownership a cornerstone in the socialist Marxist doctrine, why can't the principle of combined ownership (the one that has both public and private sectors) be the cornerstone in the Islamic economic system?
Another example is related to the income earned from the ownership of the sources of production. Capitalism permits such earning in all its ways. Whoever owns a source of production has the right to rent it and earn an income from its rent without doing any labor at all.
Marxist socialism prohibits all sorts of income earned from the ownership of the sources of production because such earning, according to its philosophy, does not require any labor. The wages which, say, the owner of a mill receives from those who use his mill, and the wages the capitalist receives in the name of interest from those who borrow his money, are not allowed in Marxist socialism, while they are permitted in capitalism.
Islam treats the same subject-mater from a third viewpoint. It distinguishes between the earning methods based on the ownership of the sources of production and other methods as well. It prohibits interest while allowing the mill's wages.
Capitalism permits both interest and the mill's wages in agreement with the principle of economic freedom or free enterprise.
Marxist socialism does not permit the capitalist to earn interest on loans, or the mill's owner to receive the wages, because labor is the only justification for legal earning: When the capitalist lends his money, and when the mill's owner lends his mill, neither of them does any labor at all.
Islam does not permit the capitalist to earn interest, but it admits the mill's owner to collect rents, according to the capitalist theory of distribution which we will explain in the coming issue [of these series], Insha-Allah.
These are three various situations, each varies according to its own viewpoint regarding distribution.
When someone describes the capitalist or Marxist stance as "doctrinal", why can't he say the same about the Islamic stance, even though the latter expresses the viewpoint of a third economic doctrine which differs from both of the other two?!
Imam reza network

Guidelines of Islamic Economy

Before explaining the guidelines of Islamic economy it appears to be necessary to keep in view two points regarding economics and its general importance.

(1) Economics
Whatever be his circumstances, man always needs food, clothing, accommodation and other necessities of life, and commensurate to his intellectual and social growth, he tries to secure them in the largest possible quantity and the best possible quality in the easiest possible way.

As far as we know, the question of securing the means of living has always and everywhere been considered and is still considered to be an important and essential problem of human life. In all periods of human life it has been one of the main problems which have attracted the attention of the individuals as well as the nations.

One of the prominent features of the present age also is the attention to the economic questions. On the one hand everyday new efforts are being made to find and preserve the natural resources and to explore new sources of wealth to be utilized in increasing and improving production to the maximum possible extent; and on the other action is being taken not only to meet the economic requirements in the easiest and the quickest possible manner but also to create even new requirements. The methods of distribution and consumption are being continuously revised.

Hence such topics as ownership, capital, enterprise labour and other related questions are the problems which are studied and discussed from various angles in a scientific way.

(2) Importance of Economic problems
Contrary to what is claimed, economy is neither the source of all social affairs, nor the basic of all moral and doctrinal questions. Anyhow, it cannot be denied that it has great impact on the culture, customs, usages and the events of the daily life of the individuals as well as the nations. The impact is so multilateral and subtle and sometimes so complicated that it is not easy to identify it. It is only through a scientific study of the economic and social factors that it is possible to determine it.

Islamic Economy
From a study of the Islamic teachings in the economic field we come to the conclusion that this divine system has paid profound attention to the effective role of economic questions in human life and has taken precau­tionary measures against the harmful effects of economic injustice.

Before entering on the detailed discussion of Islamic economy, we would like to draw your attention to a few points deduced from the Islamic texts:

Man should always maintain his freedom and should see that his human dignity is not hurt. Imam Ali (P) says:

"Do not be a slave of others because Allah has created you free".

(2) The divine teachings always revolve round the princi­ples of justice, virtue and benevolence to the kindred. They are at war against all that is nasty, undesirable and unjust.

The Qur\'an says:

"Surely Allah enjoins justice, kindness and giving to kindred, and He forbids indecency, wickedness and oppre­ssion. He exhorts you so that you may take heed ". (Surah al‑Nahl, 16:90).

Hence the general spirit, which governs all Islamic teachings, consists of support to justice and fair‑play, doing good to others, care of the kindred and fight against injustice and corruption. This is the basic criterion for judging the true teachings of Islam in all fields.

(3) The earth and all that is in it belongs to all the people and not to any particular group or class.

The Qur\'an says:

"He has laid the earth for His creatures. On it there are fruit and blossom‑bearing palm trees, chaff‑covered grain and fragrant herbs". (Surah al‑Rahman, 55:10 ‑ 12).

(4) Allah has entrusted the task of reclaiming the land to human beings:

"He brought you forth from the earth and has made you husband it". (Surah Hud, 11:61).

(5) Allah does not like that the economic benefits may be monopolized by a particular class or that wealth may circulate only among the affluent:

"So that wealth may not become exclusive for the rich among you ". (Surah al‑Hashr, 59:7).

(6) To live on the labour of others and to be a burden on them debars one from the favour of Allah:

The holy Prophet has said:

"Accursed are those who put their burden on the people".

(7) Wealth should be acquired by lawful and not by unlawful means:

The Qur\'an says:

"Do not usurp one another\'s property by unjust means". (Surah al‑Baqarah, 2:188).

The profit of an individual or a group should not involve the loss to others:

The holy Prophet has said:

"In Islam there is nothing causing damage to the people or allowing anyone to cause damage to others".

These are some of the general principles which should always be kept in mind while identifying practical systems of Islam including its economic system.

Ownership
`This book belongs to Ahmad\'. What do you understand from this sentence?

Do you not understand from it that there is a relation between this book and Ahmad on the basis of which he has a right to use it, to keep it for his use, to sell it, to lend it to others and to receive it back from a borrower. This relationship between the book and Ahmad which entitles him to dispose it of and carry it from one place to another is called the bond of ownership.

Kinds of Ownership
There are three kinds of ownership:
(1) Absolute ownership
(2) Public ownership
(3) Private ownership

Absolute ownership
Absolute ownership is that bond which entitles the owner to do whatever he likes with his property without any restriction or restraint.

From the Islamic point of view this kind of ownership belongs to Allah only. He alone can do whatever He likes with all the existing things of this world. He can bring and can take away. He can give life and can take it. He can make ill and can cure. He can give and can take. He can punish and can forgive. And so on and so forth. No external restriction exists in His case, for everything rightly belongs to Him.

The Qur\'an says:

"Whatever is in the heavens and the earth belongs to Allah ". (Surah al‑Najm, 53:31).

It may be noted that all the dispensations of Allah have the nature of mercy, bestowal, conferring and granting perfection and not that of using, exploitation or taking advantage. He disposes of what really belongs to Him, for it is He who has brought everything into existence. This world and everything in it belongs to Him and is sustained by Him. Nothing is self‑existing. Hence everything is owned by Him.

The ownership of everyone else, whosoever and whatso­ever he may be is only relative, that is of that kind which entitles the owner to deal with his property within the framework fixed for him, without any right of going beyond its limit.

When a man works, exerts himself and earns money, he is recognized to be its owner. But he is not the absolute owner of it. He is only the relative owner of it. He cannot dispose of the money earned by him absolutely according to his will. He cannot throw his money into the sea and that it is his money and hence he can do with it whatever he likes. His right of ownership is limited. For example, he cannot squander and waste it, for that is not a financial proposition.

Public ownership
According to the economic laws of Islam, all natural resources on the land, in the sea and in the space belong to the general public. They cannot be personal property of anyone. The Islamic traditions have described a large number of natural resources as public property.

According to one tradition, a question was put to imam Ja`far al‑Sadiq (P) in this respect.

In reply he said:

"Water‑courses, hills, forests, fallow lands left by their owners, are all public property. Furthermore, there are certain other kinds of wealth which, though not included in natural resources, are from the Islamic point of view, a part of public property, for example, the estate of those deceased persons who leave no heir, goes to public treasury".

Private ownership if you go to the bank of a river and catch a fish by hand, or with a hook or net, it becomes your personal property. Before you caught it anybody could go to the river and catch fish including this particular one. But now as you have caught it, none else has a right to take it. Only you can utilize it. If anybody else utilizes it, he can do so only with your permission. Thus you personally are the owner of it.

Islam respects personal property to a certain extent. The basis of personal property in Islam is the respect of the rights of the individual and his aspiration for free enterprise. Islam wants to give incentive to everyone to work and exert himself to the best of his ability, and to hope for the return of his labour. But while Islam wants that everyone should get the produce of his labour, it does not allow anyone to dominate others and deprive them of the fruits of their labour.

Wealth
From economic point of view wealth is not abundant, easily obtainable or unlimited in quantity. It can be used personally and is transferable to others. Wealth in society is like blood in human body. As blood should be in circula­tion in the body so that all organs in proportion to their need and position may use it to their advantage, similarly wealth also should remain in circulation among all the strata of society so that its members may maintain their life and be vigorous and energetic. If blood is blocked in one organ so that it does not flow to other parts of the body in sufficient quantity thrombosis will cause serious trouble. It may upset the entire system or may even lead to death. Similarly if wealth is blocked in a particular class of society, many social ailments are likely to develop. As blood keeps all the organs alive and enables the whole body to function in a co‑ordinated manner, the same is the case with wealth in society. Without economic equilibrium members of the society cannot make co‑ordinated efforts, which are necessary to save the society from decay and ruin.

Islam has given consideration to wealth from different angles. It has been mentioned in more than 70 verses of the holy Qur\'an.

In the Surah al‑Nisa, verse 5, wealth has been referred to as a means of support for man. The Qur\'an says:

"Do not give away to the idiots your property which Allah has made for you a means o f your sustenance".

In the Surah al‑Baqarah, verse 180, the Surah Saad, verse 32 and the Surah al‑Adiyaat, verse 8 it has been described as Khayr, that is good and beneficial.

Has wealth been censured in the Qur\'an?
Though in the Qur\'an we find certain verses in which a reference has been made to wealth in a way that gives the impression that this Divine Book regards it as base and despicable, yet if we go a little deeper we can discover that what has been really censured is the excessive reliance on it or attaching too much importance to it and not its real worth. What is opposed in these verses is the love of wealth for the sake of wealth and its use for pomp and show:

"Nay, but you show no kindness to the orphan, nor do you urge the feeding of the needy. On the other hand you devour the inheritance o f the orphans greedily along with your own share and love wealth ardently" . (Sarah al‑Fajr, 89:17 ‑ 20).

"Wealth and children are an ornament of this worldly life. But the good deeds of lasting value are better in the sight of your Lord and hold for you a greater hope". (Sarah al‑Kahf, 18:46).

From Islamic point of view money can be used as a means of the welfare of life and satisfaction of human wants. It should be used for improving the general conditions of the people and guiding them to the path of Allah. But it is not to be used as a means of the display of splendour and vanity, nor is it to be hoarded. To make the amassing of wealth a goal of life causes only misery and not happiness.

The Qur\'an says:

"Alas for every slanderer and back‑biter who amasses wealth and boards it! Does he thinks that his wealth will make him immortal? Certainly not. He will surely be thrown into the Consuming Furnace" . (Sarah al‑Humazah, 104:1 ‑4).

To amass wealth is a matter of vanity
"Obey not any mean swearer, defamer, going about with slander, hinderer of good, out stepping the limits, sinful, ignoable, besides all that, notoriously mischievous because be possesses wealth and sons. When our verses are recited to him, be says that they are but stories of those of your. We shall brand him on the snout (bring him to disgrace) ". (Surab al Qalam, 68:10 ‑ 15).

Power and riches should be used as a means of securing the high and noble objectives of life. That is the only proper use of them. Otherwise if they are used to compete with other people in the field of life, they become degrading, and at the most can give only a transient pleasure of this world.

The Qur\'an says:

"Know that the life of this world is only a sport and pastime, pageantry and a cause o f boasting among you and a vying in the multiplication of wealth and children ". (Surah al Hadid, 57:20).

Such attachment to power and pelf makes one oblivious of Allah and those ever‑lasting values on which humanity of man depends. It makes him engrossed in the trivial matters of daily life ‑ a state not worthy of a purposeful and honest man.

"Believers, let not your wealth and children divert you from the remembrance of Allah. Those who do so shall surely be the losers". (Surah al Munafiqun, 63:9).

That is why the Qur\'an has described money and wealth as Fitnah or an object of testing and trial. The 28th verse of the Surah al Anfal and the 15th.verse of the Surah al Taghabun introduce it as a means of testing man as to what he does with it and testing others as to how they react to the person who possesses it. If they hold him in respect simply because he is rich, then they have lost two­ thirds of their faith.

The holy Prophet has said:

"If a man shows humble behaviour toward a rich person because of his riches, two thirds of his faith is gone".

Property rights in the various economic systems of the olden days property rights were almost unlimited. On the basis of them an owner could utilize and dispose of his property as he liked and did not consider himself subject to any appreciable restriction.

In the capitalistic and semi‑capitalistic systems of modern times the basic question for which people work is that of unrestricted freedom to increase private income and to spend it in accordance with personal propensities. As to the question how this income is secured and how it is spent, it ,‑is regarded an uncalled‑for intervention in the personal freedom. Only in the cases where the interests of the capitalists clash, restrictions are imposed and regulations are formulated, but not with a view to safe­guard the interests of the masses but with a view to regulate the division of wealth among the capitalists.
In these systems the field of economic enterprise is open to only one class, viz. the capitalists. Only those persons belonging to other classes of society who render befitting services to the interests of the capitalists may be allowed to take advantage of this field to some extent. As for the masses the field of economic progress is more or less shut to them and they perforce have to follow the way planned for them invisibly by the capitalists under their overall policy.

In the present socialist systems the right of property has mostly been taken away from the individuals and trans­ferred to the state. In these systems the economic injustice prevailing under the capitalistic system has been consider­ably reduced, but at the same time a part of the natural human incentive has also disappeared.

Right of property in Islam
In the Islamic system the right of property has a special form by the help of which most of the evil effects of private property under the capitalistic and semi‑capitalistic systems can be avoided and at the same time the personal incentive to economic effort can to a great extent be maintained.

According to Islamic concept three basic conditions of the right of property have been visualized.

(1) Property should not have been acquired by unlawful means, that is the means repugnant to any definite rule of Islam.

(2) This acquisition and its continuity should not involve any damage to others.

(3) This acquisition should not invalidate any valid claim nor should establish an invalid one.

On this basis a person who purchases stolen property will not be regarded its owner, though he may not be aware of the fact of the matter, because it has not come to him through lawful means.

Similarly anything obtained by a person through cheating, forgery or coercion will not become his property and he will have no right to transfer it to anyone else.

No individual or group will be regarded as the rightful owner of the money obtained as a result of the transfer of national sources of wealth to others.

Natural Sources of Wealth
Identification of natural resources of wealth and the rules concerning them is one of the most important parts of the Islamic teachings. Some of these sources exist outside the earth which is the abode of the human beings; such as the sun, which is the source of heat and light for the earth, its dwellers and many other planets, and also the moon by the light and other effects of which, such as ebb and tide of the seas, we are benefited. Similarly air, clouds and the stars produce ample effect on human life.

It is evident that resources of this kind are for the benefit of all creatures of Allah and nobody has a right to mono­polize them. Allah has described them as His bounty to all man.

Another part of the natural resources to which man has direct access exists on the surface of the earth, the important portion of it being water in the form of oceans, seas and rivers. Still another part is the dry portion of the earth, which comprises 27% of its surface. Then there are all the minerals and other treasures hidden in the depth of the oceans, seas, rivers and mountains, which have an effective role in the life of the human beings.

These are the main sources of wealth existing in the earth. As we have already mentioned the real and true ownership of all these natural resources as well as of man himself pertains to Allah. It must be remembered that the permission of being benefited by these sources has been given to us in human interest, and hence they should not be monopolized by any particular person, persons, class or society to the deprivation of other human beings.

Earth
The earth is one of the most valuable sources of wealth. Concerning the earth there are certain interesting points which are worth knowing.

Ownership of land
In Islam there are three kinds of land from the stand‑point of ownership:

(1) Lands owned by society
(2) Lands owned by State
(3) Lands owned by private individuals

Lands owned by society
This kind of lands is not salable. Even the State has no right to sell them. Lands developed and tilled by human hands and those which come under Muslim control conse­quent on jihad are considered to be the property of the Muslim society and none can purchase or sell even one metre thereof. The Muslim government may grant their lease to persons or associations in consideration of rent, called kharaj to be deposited in the public treasury.

The lands of Mesopotamia (situated between the two rivers, the Tigris and the Euphrates) in Iraq come under this category. On being asked by Halabi about them, Imam Ja\'far al Sadiq (P) said: "These are the property of all Muslims, the Muslims of the present day, those who join the Muslim ummah later, and those who are not born yet".

Abu Bardah asked Imam al Sadiq (P) about the sale and purchase of kharaj bearing lands. The Imam replied: "Who can sell them? They belong to all the Muslims".

During tile regime of Caliph Umar a man purchased a plot of land on the bank of the Euphrates for laying a garden. After the transaction was finalized, he intimated Umar of it. Umar asked him from whom he had purchased it. He told him that he had purchased it from its owners.

When the Muslims (the Muhajirs and the Ansar,) assembled, Umar turned to that man and said:

"These are the owners of that piece of land. Have you purchased it from these people? The man replied in the negative. Thereupon Umar said: "Then hand over the plot to those from whom you have purchased it and take back your money".

The following points may be noted in respect of these lands: They are forever the property of the Muslim society and can never become personal property of anyone. Hence they cannot be sold, purchased or mortgaged.

The Muslim government, being the custodian of the general interests of the Muslim ummah, is responsible to see that these lands, the national assets as they are, should be put to the best use in accordance with the circum­stances prevailing at a particular time, and the income accruing from them should be spent for the welfare of the ummah as a whole.

Lands owned by the State
All undeveloped fallow lands and all uncultivated forests and pastures are the property of the State. The Islamic state must discharge its duty in respect of them keeping in view the interests of the present as well as the future generations. Whenever deemed in the national interest that the land may be given in grant to an individual, society or association, it may be leased. In every case it should be put to the best use.

Lands owned by private individuals
If a person living in a non‑Muslim territory decides to embrace Islam and joins the Muslim society his right to the movable and immovable property held by him will be respected. If he was the owner of any land, he will continue to be so.

If the Muslim government in any case deems it in the national interest to assign any plot of land to an individual or a partnership, it can do so. In that case the individual will become the owner of that plot independently or as the member of a partnership.

As you might have observed, in the economic system of Islam the field of personal ownership of land is very limited in principle, and it may be said that, as a rule, this great and all‑pervasive source of wealth should not be personal property.

The utilization of the sources of wealth is one of the questions to which heed has been given in the Islamic economy. From Islamic point of view anything which can be used as raw material for producing the stuff required by the members of society, should not be left unattended. Everybody within his means is required to try to reclaim land, bring it under cultivation or put it to some other use, for, according to the Qur\'an, Allah has brought forth man on the earth to husband it.

In Islamic jurisprudence the waste land, which has not been developed and put to any use yet, is called `dead land\' and to reclaim it is called `giving life to the dead land\'. According to the Islamic point of view he who takes action to reclaim such land, has a special claim to it.

The holy Prophet has said:

"He who brought a dead (barren) piece of land to life (brought it under cultivation) is the owner of that land".

"Those who reclaim a piece of land and bring it under cultivation, have a better claim to it, and hence it is theirs".

A companion of the Prophet, whose name was Asmar says: "I was with the Prophet along with certain other persons. The Prophet said: "He who takes action first to reclaim a piece of waste land will be the owner of that land".

After this announcement the people became so enthu­siastic that they regularly went to the desert to select a suitable piece of land with a view to reclaim it.

It is evident that with the right of occupying the reclaim­able land, the enthusiastic people are encouraged to bring more and more land under cultivation with the result that the level of production naturally goes up.

To reclaim land through cultivation or construction of a building, house, factory, etc. naturally takes a long time and cannot be completed in a day. For example, you decide to turn a hectare of land into a garden or a farm. First you go and select a suitable piece of land and then start making necessary arrangements to secure all that is necessary to carry out the intended job.
Obviously all this will require time. Suppose in the meantime some one else selects the same tract of land for his use and starts working on it, then where will you stand? To avert such a situation the economic rules of Islam allow a man who intends to reclaim a tract of land to mark it by stones or fencing. By doing so he will establish a prior claim to it, and nobody else will be able to occupy it while he is making due preparations to reclaim it. Anyhow, marking will have no legal value if resort to it is made with a view to either merely grabbing the land, or depriving others, or to earn money by selling it subsequently.
Keeping arable land uncultivated
If anybody leaves his arable land untilled and does not take action to cultivate it, he loses his claim to it. His land may be handed over to someone else who may undertake to put it to use.

Imam Musa al Kazim (P) is reported to have said:

"Land belongs to Allah, who has given it to His bondmen to earn their livelihood. Hence, if anyone leaves a tract of land unattended and unused for three consecutive years without a valid reason, it goes out of his hands and may be handed over to someone else".

From the above it is clear that:

Firstly he who reclaims a tract of barren land has a right of ownership to it.

Secondly, without developing it and putting it to use, nobody can claim the ownership of barren land.

Thirdly, only superficial occupation and marking are not enough to claim ownership of land. There should be some work of productive and economic nature.

Fourthly, one who reclaims barren land, has a right to it only so long as he puts it to economic use.

Hence the action of those who occupy barren land in different ways simply to earn money by selling it to those who require it for agricultural or construction purposes, is unlawful and contrary to the economic teachings of Islam. They should be stopped from doing that.

Not only the lands which have been simply marked but even those which were reclaimed once but later left neglected and unused may be occupied and put to use by others without requiring permission of the original occupier.

Imam al Sadiq (P) is reported to have said:

"He who develops fallow land and cleans its water channels, has only to pay its zakat (tax under the Islamic law). If this land was previously under the occupation of someone else who neglected it and left it unused, he will not have a right to take possession of it again, for all land belongs to Allah and to him who puts it to use".

The Shahid‑e‑Thani, one of the greatest Shi\'ah jurists of the 10th century (Hijri era) says in his book, Masalik:

"The waste land reclaimed by a person but left neglected for long, returns to its original position and can be lawfully reclaimed by any other person. The ownership of the first person was due to his reclamation and ceased to exist when he left the land neglected".

Water
Water is one of the first needs of every living being. It is also one of the most valuable natural resources from the agricultural and industrial point of view.

Under the Islamic economic system there are two kinds of water:

(1) The water which is naturally accessible and can be freely availed of.

(2) The water which is not naturally accessible, such as that of wells, underground channels, constructed canals etc.

Naturally accessible water
It is public property. Everyone can avail himself of it. One automatically becomes the owner of any amount of water taken by him for his consumption.

Shaykh Tusi, a great Shi\'ah jurist of the 5th century (Hijri era) says in his book, al‑Mabsut:

Water of sea, of the rivers, such as the Tigris and Euphrates and of the natural springs that issue forth at waste lands, is public property, and according to the unanimous verdict of all jurists can be used lawfully by anyone in any quantity, for ibn Abbas has reproted that the holy Prophet said: "All people share three things: water, pasture and fuel".

Water not naturally accessible
There is water which is not directly accessible. For example to be able to make use of underground water it is necessary to dig a well or a subterranean channel. Similarly to utilize the water of big rivers for irrigation it is necessary to dig canals and channels. According to Islamic economy this kind of water is also regarded as public property and is not subject to sale and purchase. The only difference is that in consideration of the effort and exertion made by the person who dug the well or the canal, he has a prior right to use its water to the full satis­faction of his personal, agricultural or industrial needs. Others have no right to obstruct him. But once his need is satisfied, he cannot stop others from using water or demand money from them for being allowed to use it.

In this respect Shaykh Tusi says in al Mabsut:

"When we say that such and such person is the owner of that particular well, his ownership only means that he has a prior right to the use of its water for the purposes of drinking, watering the cattle and irrigation. Hence if he has water in excess of his need, it is obligatory on him to make it available free of cost to those who require it".

This rule is based on a tradition which has been quoted from imam al Sadiq (P). He is reported to have said:

"The holy Prophet prohibited the sale of the water which a person has at his disposal because he has a right to its use for the purpose of drinking and watering of cattle, or because he has built a dam on a river to irrigate his land. If he does not require it, he must not stop others from using it. Hence do not sell such water, but make it available free of cost to your neighbour or brother".

Minerals
One of the other natural resources of great value are minerals.

A great amount of the minerals is found in the earth and on the land. Some amount of them is found in water and in the space also. Many kinds of salts and chemicals which can be extracted from water and the use of solar energy obtained through space have converted water and space into valuable sources of wealth.

According to the rules of Islamic economy, minerals, whatever be their form, cannot become personal property. They will always be the property of society. A reference to the books of the Islamic law shows that as far as those minerals are concerned the extraction of which does not involve large scale drilling, excavation etc. all the jurists and either Muslim scholars are almost unanimous on this point. As for those minerals the extraction and exploita­tion of which requires large scale excavation etc., though some difference of opinion exists, many of the prominent jurists subscribe to the view that they are also property of society. Muhaqqiq Thani says that this is the view of the majority of Shi\'ah jurists.

Economic Role of Human Labour
From the foregoing study we come to the conclusion that the Almighty has put abundant natural resources at the disposal of man and has provided him with all that is necessary for life. There is no doubt that these resources have been provided to him so that he may make the best use of them in his life and not merely for watching them from a distance, or for disregarding them, resorting to monastic life and abandoning the world. Islam denounces renunciation. It is reported that the holy Prophet has said: "There is no monasticism in Islam ".

Labour is the key of utilizing natural resources
Man can be benefited by the natural resources only if he works, exerts himself and makes efforts. Suppose a thirsty man is passing by a spring of sweet water. This spring has been created for his use so that he may quench his thirst. But his thirst can be quenched only if he at least stretches out his hand, takes a handful of water and drinks it. Suppose a hungry man passes by a wild chestnut tree. Its nuts, natural food, are available to satiate his hunger. But at least he has to stretch out his hand, pick the nuts and put them in his mouth. Hence work and only work is the key of utilizing the natural resources, which have been described by the Qur\'an as the treasures of Allah\'s mercy.

When that thirsty person stretched out his hand to the spring and took a handful of water or that hungry person plucked a few chestnuts, it is in the fitness of things that we acknowledge that that handful of water or those chestnuts belong to him, and that none has a right to snatch them from his hand and use them. This right and this bond between man and work is the bond of ownership.

From the study of the economic teachings of Islam we deduce that ownership is the fruit of labour only. When man applies his labour to natural resources, they become his property. His work may be elaborate and complicated or may be very easy and simple such as lifting a thing from its source, taking a handful of water from a river, a canal or a spring, plucking a number of fruits from a wild tree, picking a thorny plant from the forest or catching a bird. In the Islamic jurisprudence such acts are called `acquiring\'. If a person acquires a thing from such natural sources, as cannot be appropriated exclusively by anyone, techni­cally called `Mubahat ; it is his.

In certain cases it is not so easy to reach a natural source. One has to plan and exert himself to get what he requires. Suppose there is a thirsty person and he wants to get water, but there is no water above ground. Then he will have to dig a well, arrange a bucket and a rope, and then draw water. Or alternatively he will have to make a pump and install it, or dig several wells and connect them by means of an arterial channel, till the water reaches the surface of the earth.

To encourage man to undertake such jobs it is necessary that his right to what he produces is acknowledged and he is assured that the more he will exert himself, the more prosperous his life will be. Of course, while giving him such a right, it is essential to take all aspects of human life into consideration. His encouragement should not pave the way for his indulging in the oppression and exploitation of others and consequently result in their discouragement and disheartening.

That is why Islam, while recognizing man\'s ownership of the products of his labour, has also placed certain restric­tions on personal property.

No gain without work
From an overall study of the economic teachings of Islam it may be deduced that the gain which anyone may make in life depends on his work. Nobody has a right to live on the labour of others without performing any useful work himself. The holy Prophet has been reported to have said: "Accursed is he who puts his burden on others". (Wasail al-Shi’ah, vol. 12, p. 18).

It is reported that a supporter of the Commander of the Faithful, Imam Ali (P) requested him for financial aid. He was expecting that the Imam would grant. him a sum from Bayt al‑Mall, the exchequer.

But the Imam said:

"This money is neither mine nor yours. It is the output of the fights of the Muslims and the present of their swords. If you took part in the fighting you are entitled to a share. Otherwise nothing out of the produce of their labour will be given to others". (Nahj al‑Balaghah, vol. II p. 226).

In order to safeguard the interests of those who work and exert themselves, the economic system of Islam is against any gains without work. It does not want to give the idle and cunning self‑seekers an opportunity to live on the labour of others and deprive the diligent and industrious workers and their families of the bread earned by them by the sweat of their brow. Unemployment and idleness both are harmful to the individual and to the society.

Imam Musa al‑Kazim (P) is reported to have said: "Allah hates the idle, sleepy man".

From the Islamic point of view a man who works hard to earn his livelihood is as good as a fighter in the way of Allah. Fighting in the way of Allah aims at strengthening the basis of human virtues and spreading social justice, whereas unemployment and idleness deal a hard blow to both of them.

Production, distribution, services etc.
From the economic point of view of Islam useful work is not confined to such productive activities as agriculture, animal husbandry and industry. Distribution, services and every useful work which meets any human need, is recognized as an economic work, and it is the right of the person who performs it to be benefited by it and to manage the affairs of his life with profit from it.

Production.
A farmer tills the land, scatters seeds in it, irrigates it, weeds it and sprays insecticides on it. At the time of harvest he gathers the produce and prepares it for consumption. But all the consumers cannot come to the farmer to purchase their requirements.

Distribution
Here the requirement of social life paves the way for another essential and useful work. It is necessary that someone else should come, take the commodities of this farmer and other producers and make them available to the consumers. He may carry his wares to the doors of the consumers as a pedlar or may open a shop in the area where the consumers live. In either case it is his job to collect the required commodities from the centres of their production and to sell them to the consumers.

The distribution, that is carrying the goods to the consumer, is in itself a positive, useful and essential work. It is necessary that he who undertakes it must get some profit. It is for this reason that the price of the commodi­ties purchased from a shop or a pedlar is always somewhat higher than the price of the same commodities if purchased direct from a producer.

In healthy economy this difference of price remains within the limit of the value of the additional work undertaken by the distributor in carrying the commodities to the consumer. He is not allowed to make large profit by the goods by purchasing them from the producer at a nominal price and selling them to the consumer at exorbitant rates. The work which is performed by the distributor is called trade and commerce.

Services
There are certain requirements of human life which are neither met by production nor by distribution. When your child falls ill, you take him to the physician. The physician must perform some work to cure him. This work is useful and essential. But is it production or distribution? It is neither. Then what is it? It is a service to you and to your child, a very valuable and effective service. In consideration for his services the physician must get such remuneration as may provide him with the means of living.

In social life there are many occupations which can be considered neither to be a part of production nor that of distribution, but the wheels of life do not revolve without them. In modern terminology they are called services. Under the Islamic economy every kind of useful and essential work, whatever be its nature, production, distri­bution or services, is acknowledged to be of value, and hence it should fetch a suitable profit.

False work or a device for exploitation
According to the economic principles of Islam only useful and value‑generating activity is considered to be true work, that is the work that facilitates basic human life and makes it more pleasant. A thorough study of some Islamic traditions makes it clear that under Islamic economy there is no place for the activities which have no effective role in production, distribution or services. Nobody has a right to contemplate any profit on account of such superfluous and fruitless work.

Imam al Sadiq (P) is reported to have said:

"I don\'t like to hire a water‑mill and let the same for a higher rent, without at least offering a security for it or adding anything to it or equipping it better". (Wasail al Shi\'ah, vol. 13, p. 259).

Imam al Baqir (P) was asked: "Is it lawful if a craftsman takes an order, but without doing anything himself transfers it to someone else and in this process makes some profit?"

The Imam replied: "He should not do so".

In another version of the report it has been added:

"He should not do so, unless he has carried out the order partly". (Wasail al Shi\'ah, vol. 13, p. 264 ‑ 265).

A coppersmith referred his case to Imam al Sadiq (P). He said: "I sometimes take an order and then transfer the job to the apprentices working under me on the condition that they will get only 2/3 of the wages settled".

The Imam said: "This is improper, unless you join them in carrying out the job". (Wasail al Shi\'ah, vol. 13, p. 266).

One of the very effective factors in the increase of the prices is the existence of several middlemen through whose hands the commodity passes from producer to consumer, each of them demanding income for himself without performing any useful and essential work. From the above traditions it may be deduced that so long as these middlemen carry out a useful role at least from the distribution point of view, they are entitled to get profit in proportion to their work, but those middlemen who simply slow down the process of distribution deserve no profit. They should be stopped from carrying out their false work which is only a device for exploiting the producer and the consumer.

The brother of Imam al Kazim (P) asked him:

"Can a man, who has bought some foodstuff, sell it to another person before actually taking possession of the same? "

The Imam replied: "If he sells at profit, he can\'t; but if he sells it at the cost price, there is no objection".

Usury
One of the false works of the worst kind is usury which should be regarded as one of the most cruel sorts of exploitation. Islam is severely against this dirty form of exploitation, in whatever garb it may appear, and rigorously denounces the usurers. Before we undertake the discussion of usury, it will be well to explain the real role of money in human society.

It is said that money has come into existence to facilitate the exchange of commodities.

In small and primitive societies exchange was made by means of barter. If anybody produced a commodity in a quantity bigger than he required, and needed some other commodities produced or possessed by others, he would exchange his commodity with what others had at a ratio to be fixed mutually by the parties concerned. For example a farmer would exchange his food grains with other necessities of life, such as clothes and other household requirements. In spite of being simple, the barter system presented serious problems in bigger societies because for such a transaction it was necessary to find a person or a market:

• Requiring the commodity offered;
• Ready to exchange it;
• Offering another required commodity of equal value.

For this reason the system of business underwent many changes. Many kinds of markets at various levels were set up and at last money was introduced as a medium of exchange.

Deviation of money from its course
This solution resolved many difficulties, but in its turn created new problems. One of these problems was that money which was designed as a medium of exchange and had to play the role of a measure of the value of production and distribution, gradually lost its original function and itself became an object of transaction.

This situation arose in this manner that some people concentrated some amount of money with them and without accomplishing any work and taking any risk lent it as loan to those who needed it. They demanded from the borrower some additional money or services in lieu of making the loan to him.

In doing so their only objective was to maintain their power and to increase their capital. They did not care whether by receiving that money the borrower made any gain or suffered a loss, and whether he had spent it for the purpose of production or to meet his personal needs. The practice of lending money with the condition that the borrower will return it along with something in addition thereto is called usury.

Today the investment of their hoarded money in usury by the big capitalists has created a queer scene in the economic world. Now the capitalists control both produc­tion and consumption as well as the prices. This situation has led to the creation of two opposite classes of the rich and the poor, the well‑fed and the starving, the powerful and the powerless in society. This totally undesirable state of affairs may be described as imperceptible slavery.

Islam severely forbids usury and is not in favour of the use of money as an independent factor to earn profit, for such a practice causes economic rift. Islam is also opposed to the stagnation of money. It does not want that it should be withheld from circulation and hoarded by anybody. Money should be used for increasing economic activity, enhancing production and creating new jobs for the members of society so that it may play its correct and effective role. Under Islamic economy if the stagnant money reaches a certain level and is not utilized for one year, a tax of 21/z per cent, called zakat is levied on it.

Precedents of usury in history
In Egypt: As recorded in history, usury existed in ancient Egypt. The only condition was that the total of interest should not exceed the principal, viz. the original sum lent.

In Greece and Rome: In these two lands usury was practised. If the borrower failed to repay the loan with interest, he was captured and enslaved.

In China: In ancient China the practice of usury and the resultant malice and hatred between the exploiting class and the exploited had assumed such proportions that there is still a proverb in Chinese which says that "the major thieves are the money‑changers".

In Arabia: Before the advent of Islam usury was rampant in this land. In Madina there were Jewish tribes engaged in trade. Though there are injunctions in the Old Testa­ment which forbid usury, they advanced money as loan on interest to the people who in their turn lent it at a higher rate of interest to others.

Usury in the Qur\'an
The basic objective of Islam being the emancipation of people from every kind of material and doctrinal slavery, in the economic field also it has paid due attention to all the factors which restrict the freedom of action and lead to material and intellectual bondage. It has formulated rules to save the situation. One of these rules is the prohibition of usury, which was enforced by the Qur\'an in several stages. In the first stage the practice of usury was declared un­desirable, and attention was drawn to meeting the social needs of the needy without thinking of making any profit.

"What you give by way o f usury, so that it may increase in the wealth of others does not increase it the sight of Allah. But what zakat you give in desiring Allah\'s pleasure, will be repaid to you manifold". (Surah al‑Rum, 30:39).

In the second stage the Jewish usurers were denounced, as they indulged in. the practice of usury in spite of the fact that their own religious injunctions prohibited it. They were told that they were destined to painful chastisement:

"Because of their practising usury, though they were forbidden it and their devouring the property of people wrongfully. We have prepared a painful punishment for the disbelievers among there ". (Surah al‑Nisa, 4:161).

In the third stage exorbitant and compound interest was forbidden.

"Believers, do not devour usury doubled and redoubled". (Surah Ale Imran, 3:130).

At last in the fourth stage usury was abolished altogether and its practice was declared tantamount to an act of hostility against Allah and His Messenger. The Muslims were asked to return what they had taken by way of interest and this was declared to be one of the conditions of faith.
"Believers, have fear o f Allah and forego what is still due to you from usury, if you are (true) believers. But if you do not do, be warred of war against you by Allah and His Messenger". (Surah al‑Baqarah, 2:278).

Why has usury been so strictly prohibited?
As to the reasons of the prohibition of usury and that too with such severity, a number of traditions have come down to us from the leaders of Islam who have pointed out how

harmful it is to the moral and economic life of the indivi­dual and society. We quote one tradition as an example.

One of his companions sent certain questions to Imam al‑Riza (P) and requested him to reply to them in writing. One of the questions was about usury. In this respect the Imam wrote as under:

"Usury is unlawful, for Allah, the Almighty has forbidden it because it brings ruin and leads to the wastage of the property of the people. When a person borrows one dirham, but pays back two, he pays one in lieu of that what he had taken, but his second dirham has been wasted. Thus one of the two parties has suffered loss. That is why Allah has forbidden usury. It is just as Allah has decreed that the property of a person of weak intellect will not be made over to him until he has developed sufficient judgment and discretion, because it is feared that his property will go waste.

For the same reason the charging of interest in the case of sale on credit is also forbidden. That also does away with fellow‑feeling and causes loss of property. Everybody becomes interested in making easy profit and gives up the practice of advancing interest‑free loans, though it is an act of virtue to help the needy and to lend them money without charging interest. In any case, usury leads to corruption, injustice, violation of the rights of others and the wastage of property". (Wasail al Shi\'ah, vol. 12, pp. 425 ‑ 426).

In this tradition attention has been given to two basic reasons of the prohibition of usury:

(1) Wastage of a part of the property of the man who pays interest and its transfer to the pocket of the usurer for nothing. Usury is a sort of plundering the people and stealing the produce of their labour. It is grave injustice. It paves the way for economic crises. It makes the rich, richer and the poor, poorer. Hence it must be stopped.

(2) Kindling the fire of avarice, strengthening the spirit of profiteering and weakening that of fellow‑feeling and philanthropy.

A scientific study of the effects of usury also points out the same economic and moral evils which have been reflected in this tradition. By studying the relation of the big and small usurers with life and the people everyone can feel this painful reality both in the economic and moral fields.

Banking
Usually when the subject of the prohibition of usury is discussed, a question is raised as to whether with its abolition the whole system of banking will not come to a standstill, while it is known that banking is an essential part of our modern life.

The reply to this question demands that we should discuss the problem in detail.

Banking activity can be divided into two distinct parts, one not normally linked to interest, and the other normally linked to it.

The first part includes such functions as those connected with drafts, pay orders and cheques, current account, saving account not bearing interest, money exchange etc.

The second part includes the advancing of commercial, agricultural, industrial, occupational, house building, business opening loans etc.

The first kind of activities are very effective in facilitating the life and commercial dealings and have no inherent harmful effects, neither for the individual nor for the society.

Suppose a father wants to send money for the monthly expenses of the education of his son, studying in an education centre somewhere else, or a merchant of one city wants to make payment for the goods purchased by him in another city.

They either will have to undertake a journey themselves to make the payment at the other end and thus undergo heavy expenses and much inconvenience, or they will have to look for an honest and trust worthy passenger going to the place concerned. Alternatively they may search for a merchant in their town having a business link at the other place and send a draft through him. Evidently each of last two cases involves much inconvenience and worry.

Will it not be better to have a vast and reliable institution which may carry out this function conveniently and satisfactorily at a minimum cost? Such an institution is the bank.

A man engaged in his business dealings the whole day wants to go home in the evening with relaxed mind and wants to spend his rest hours with his wife and children peacefully. He may have a hundred or a thousand or more dollars with him in his store. If he carries the cash with him, he is afraid of robbery and if he leaves it at his store, there is a possibility of theft. He is worried about the safety of this money and cannot sleep with his mind at rest.

In these circumstances it is better if a well‑equipped institution takes his money daily for safe custody and, whenever he wants, pays him back against a cheque or pays to anyone else in whose favour he draws a cheque. This is a very useful function of a bank.

An economical and discreet man, and for that matter a woman or a child, saves something from his daily income for the rainy day. However small this amount may be, it is difficult for him to keep it with himself for, on the one hand, any moment he may have a temptation to spend it, and on the other, there is a possibility of its being lost or stolen. If he hands over his savings to someone else for safe custody, that person may misappropriate it or may not be in a position to return it when demanded. It will be a great boon to the people if an institution undertakes to keep their savings and to return the same whenever required by them. This is another useful function of the banks.

In the case of big transactions involving large amounts it is difficult to count the money, especially the small currency notes. Their counting takes a long time and whatever care is taken there is always a possibility of a mistake. In such cases if the payment is made by means of a cheque much time is saved and the possibility of a mistake is also averted.

These and similar other advantages of the banking system cannot be denied, and it will be foolish to overlook them.

The banks with their vast organization and reliable position render a very useful service in meeting such requirements of life, and this is enough vindication of the necessity of their existence.

The prohibition of usury, howsoever vast its sphere is supposed to be, does not in anyway hamper such banking activities. In Islamic society both the state and the individuals can set up institutions to carry out such functions and can charge their commission on percentage basis for the service rendered by them, without being involved is usury.

There is no reason why the banks instead of carrying out current account transactions free, giving interest on saving accounts, and meeting their expenses by charging interest from the borrowers should not charge adequate commission on current and saving accounts in the same way as they do in the case of drafts and letters of credit. Thus they will be able not only to meet their expenses but also to earn profit without being involved in usury.

Thus the total prohibition of usury in Islam does not in any way hamper the banking activities of the first kind, nor does it deprive the Muslim society from such useful and beneficial facilities of life.

As for the second kind of activities, in most parts of the world today they do not aim merely at economic welfare. Their main aim is usury accompanied by acquiring power and establishing grand formations. The economic welfare and the progress of knowledge and industry even if taken care of are only secondary considerations.

The banks are always on the lookout for the most suitable projects to invest their capital with a view to earn the maximum interest. If in certain cases they are found to lend money for strengthening the economy of an institution or a nation, they do so only to serve their own interest and not that of the institution or the nation concerned. These capitalists are wise enough to be anxious to preserve the source of their profit‑making for ever. They are the discreet leeches. When they stick on a body, they do not suck so much blood out of it that it should fall totally exhausted. They leave some spark of life for it so that it may continue to struggle between life and death and keep on serving their interests.

The financial and commercial laws of Islam have no doubt forbidden this side of banking.

It is possible that with this prohibition, the big capitalists may not be found willing to invest their capital in bank loans and may not agree to lend their money without any interest. In this case the following questions will arise:

(1) Big industrial, agricultural, transport and trade projects require huge capital investment. A part of the capital is normally supplied by the banks. If interest bearing loans are forbidden, the expansion of these activities and consequently the progress of science, industry and economy will be undermined.

(2) It often happens that a worker, a professional, a farmer or a craftsman falls into straitened circumstances and the solution of his problem depends on a small loan. Even an interest‑bearing loan is a great boon for him. With the prohibition of interest such a solution will not be possible and many a family will have to face unbearable difficulties.

(3) The loans for house‑building and starting business even if accompanied by interest are a means of the welfare of the under‑privileged classes. These classes should not be deprived of the only means at their disposal by prohibiting usury.

Solution of the problem
in the foregoing question. each of these two has been put in the other\'s place.

It is true that the accomplishment of vast and extensive industrial and agricultural projects and the scientific and technological progress in the fields of industry and agriculture require huge sums of money. But it is not necessary that big capital should always belong to a particular person or a limited number of persons, and the way of procuring vast capital is not confined to the usual practice of the capitalist countries of taking full‑interest or low interest loans from the banks.
Vast funds can be created out of the capital belonging to small capitalists, by forming joint stock companies and co‑operative societies and invested in the development projects. There is no need of seeking any aid from the big capitalists and usurers. The profit of such companies, if any, will be distributed among a larger number of individuals, thus ensuring social justice and preventing the concentration of wealth in the hands of a limited number of self‑indul­gent and voluptuous capitalists in the society.

Thus the prohibition of usury does not stop the creation of big capital. It only stops the emergence of big capitalists, and that is what is wanted by Islam and has been advocated by most of the progressive social thinkers of the past few centuries.

Furthermore, the efficient and sound governments can make investment on a large scale in big industrial, irriga­tional and agricultural projects in a far better way than the private capitalists. As a good government represents the nation, naturally the investment made by it will be utilized in the best interest of the nation.

The nationalization of the big industries by the capitalist countries and their action to build dams, roads, railways and shipping lines in the public sector, shows that big investment is not the monopoly of the big capitalists, the usurers.

It may possibly be said that the governments are not good traders and good employers and it is therefore, better to leave the management of economic affairs, and even of other development sectors like education, health and reconstruction and development in the hands of private sector subject to free competition. The governments should abstain from involving themselves direct in such activities. Their duty is only to undertake special projects and to provide correct guidelines in the best interest of the nation.
In that event the duty of the government will be to set up special banks in the public sector to provide interest‑free loans to the individuals and the private institutions and thus control the economy of the country. Such a position will automatically give the government a good opportunity to give preference to the interests of the nation over the special interests of the borrowers and to see that the national capital does not fall into the hands of the private profiteers and hoarders.
The government can impose heavy taxes on the profits earned by the receivers of these loans and spend the income to the national benefit. This way it can again check the emergence of the petty‑minded luxurious and licentious capitalists and guard against deep class rift in the society.

As for the second and the third questions, there are two possible ways of dealing with them:

(1) Setting up of `societies\' for advancing interest‑free loans by individuals or by groups of persons.
Allah has promised abundant reward for advancing interest‑free loans and has regarded this act superior to giving alms and grants in aid. If this work is organized on proper lines and proper publicity is given to it, such `societies\' are bound to become popular. Even now some such societies exist.

These societies may charge a fixed percentage in the name of service charges to meet their current expenses but there being no question of interest on the actual money advanced. Their annual statement of account should not show any profit.

(2) Establishment of interest‑free banks
If the above method does not prove adequate, it is again the duty of the government to set up banks out of the public budget to advance occupational, industrial, agricul­tural, house‑building and business opening loans. To cover the current expenses these banks may collect service charges, but should not be allowed to charge any interest on the actual loan. (For details a reference may be made to Al‑Bank al‑la Rabawi fil Islam (Interest free bank in Islam) by Ayatullah Muhammad Baqir al‑Sadr.)

Conclusion
The prohibition of usury does not hamper any social or economic benefits of the banks. True interest‑free banking based on service charges is not lawful but is also a national duty obligatory on the Muslim community as a whole.

With the prohibition of usury what has been forbidden is the interest‑bearing banking and the emergence of a self‑indulgent and voluptuous class. This in itself is a big distinction of the financial and commercial laws of Islam.

Transfer of Ownership
It is a right of the owner of a thing to be able to transfer it to others. In certain cases this transfer instead of being voluntary is forced.

A voluntary transfer takes place by means of a transaction and a forced transfer through inheritance etc.

Transactions
There are many kinds of transactions depending on their purpose, and in various economic systems they take different forms. Every transaction has its own rules. In this book we mention some of the most common forms of transactions, such as:

(1) Sale: It means the transfer of a determinate commo­dity in exchange for another commodity or money, such as the sale of a house. In financial and other similar transac­tions money is exchanged for another money.

(2) Gift: It means the transfer of a property or a sum of money to someone else as a present, either totally without compensation or accompanied by the acceptance of a present or gift made by the other party.

(3) Loan: It means the transfer of a property or a sum of money on the condition that its equivalent will be returned after the expiry of a fixed period.

(4) Mortgage: It means putting a thing in pawn, that is handing over property by a debtor to his creditors as a security for the debt with the promise that it shall be returned on payment of debt. If the creditor fails to pay the debt, the creditor can sell the property to satisfy his debt out of the sale proceeds in accordance with the relevant rules and hand over the surplus money, if any, to the owner of the mortgaged property.

(5) Letting: It means a transfer of the right of enjoying the use and advantages of property (and not its ownership) for a fixed period in consideration of a fixed rent, such as the letting of a house, a store, a car, an aeroplane etc.

(6) Borrowing: It means giving by a person of a thing to another person intending that the latter should enjoy its use gratis and return it. For example you lend your bicycle or car to a friend for going to a certain place and returning it to you after coming back from there.

There are two ways of effecting this kind of transaction. Either it may be stipulated that if the bicycle or the car in question is damaged, the borrower will be responsible, or no such condition is made.

In the first case the borrower will be responsible to make amends for any loss or damage. In the second case he will not be held liable if the bicycle or the car is destroyed or damaged without his fault.

(7) Guarantee: It means taking responsibility for the payment of debt incurred by another person. In this case if the debtor does not discharge his obligation, the guarantor is liable to make the payment. This is one of the most ancient forms of insurance. Most of the latest forms of insurance are also a kind of guarantee developed accord­ing to modern needs.

Those forms of insurance that do not fall under the category of guarantee, may be regarded as new and independent kinds of transaction. They will be governed by the general Islamic laws regarding transactions and contracts.

General rules of transaction
In all transactions the following rules must be observed:

(1) The two parties to the transaction must be adult.

(2) Besides being adult, they must be mature, viz. within the usual limits they must be able to understand the nature of the transaction. A transaction effected by a lunatic or an idiot, not having sufficient judgement and understanding has no legal value.

(3) A transaction must be effected voluntarily. If effected under duress, it will have no legal value.

(4) A person effecting a contract must not have been placed under inhibition and restrained from alienation and disposition of property. The competent authorities may pass an interdiction or prohibitory order restraining all alienations by an insolvent.

(5) The two parties should have an adequate knowledge of the subject‑matter of transaction in regard to its quantity and main characteristics such as its colour, shape, design, location, method of use etc. There should be no ambiguity which may cause any dispute subsequently.

If the parties concerned decide to effect a transaction without being meticulous about the details of the subject of transaction, the deal should be based on a compromise either with or without some recompense.

(6) The transaction which is being entered into should not be a help to sin, injustice or corruption. As a rule it must not involve a violation of any sound law.

(7) Every transaction should be clear and free from every kind of fraud and deceit. A purchaser should have no fear that defective goods will be passed to him or that he will be over‑charged. Such suspicion and lack of confidence is the source of much bitterness in individual and social life.

Imam Ali (P) is reported to have said:

"Allah loves an honest professional". (Wasail al-Shi’ah; vol. 12, p. 96).

In the course of a lengthy tradition the holy Prophet is reported to have said: "He who cheats the people in the transactions is not a Muslim". (Wasail al-Shi’ah vol. 12, p. 210).

Imam Ja\'far al‑Sadiq (P) is reported to have said:

"The holy Prophet forbade the adulteration of milk for sale by the admixture of water". (Wasail , vol. 12, p. 208).

Hisham ibn Hakam is reported to have said:

"I was selling sabiri cloth (a kind of fine cloth, the quality of which is difficult to ascertain in shade) in shade. Imam Musa al Kazim (P) passed by that way mounted on a horse. He turned to me and said: "Hisham to sell a thing in shade is a kind of fraud, which is forbidden". (Wasail al‑Shi\'ah, vol. 12, p. 208).

Imam Ja\'far al‑Sadiq (P) has said:

"It is prohibited to cheat a person who has not been meticulous about a transaction and has relied on you". (Wasail al-Shi’ah, vol. 12, p. 363).

Different kinds of sale
There are four kinds of sale dependant on whether the subject of sale and its price are delivered at the time of bargain or subsequently.

(1) Cash: Both the goods and the price are existent and are exchanged at the time of transaction.

(2) Credit: The goods are existent and are delivered to the purchaser immediately, but he pays the price subsequently.

(3) Forward sale/purchase: The goods are not existent, but the price is paid in cash.

(4) Speculation: Neither the goods are existent, nor their price is paid in cash. This kind of speculative transaction is void in Islam and has no legal effect. This kind of sale which now‑a‑days is considered to be normal in many cases, puts an extra burden on the consumer without the original producer gaining anything from the increase, in prices which go up unnecessarily with the intervention of additional middle‑men.

Speculative sale and as a rule any sale before taking possession of the goods is one of the main causes of the deviation of trade from its normal course. As we have already said the true role of a merchant is to undertake distribution of goods and to \'earn a reasonable profit in consideration for his labour. But in the case of speculative transaction there is no actual give and take and hence the question of distribution does not arise. The dealing is only verbal or at the most merely on paper. Its official recogni­tion means that a buyer, without investing anything, purchases the goods in the air and subsequently sells them at a profit. The next buyer also does the same, and again secures further profit without carrying out the least work of distribution. The only effect of such a transaction is the unnecessary increase in the number of the middle­men and their commission, leading to the false increase in the price. The producer and the real distributor not only are not benefited by this increase, but have to bear an extra burden as consumers.

A careful study of the Islamic traditions will show that in Islam special heed has been given to this economic deviation. We have already quoted a saying of Imam al‑Kazim (P) in regard to the sale of the goods before taking possession of them.

Necessity of knowing the laws of trade
Anybody who wants to start any kind of business should first make himself conversant with the religious laws of trade so that he may not be involved in unlawful activities and may not harm the society.

Imam Ali (P) has been reported to have said on many occasions:

"First law, then trade".

Some of the recommendations made by Islam in this behalf are the following:

There should be no dispartity in the price of a commodity quoted to different customers.
The seller should not be severe and rude to the customers while bargaining.

He should not hesitate as far as possible to take back a sold item if a customer so desires.

There is a tradition which says:

"On the Day of Judgement Allah will forgive the mistakes of a person who takes back the goods sold to a Muslim".

He should abstain from swearing even if the subject of oath is true. He should point out if the goods are defective. He should not praise his goods too much. Similarly the buyer also should not disparage them.

He must strictly abstain from under‑weighing and regard it as a deadly sin. He should always keep in mind what the holy Qur\'an says in this respect:

`Alas for the defrauders who when others measure for them, demand it full. But when they measure to others or weigh for them, they defraud them! Do they not think that they will be raised to life again on a fateful day: The day when all mankind will stand before the Lord of the universe?" (Surah al‑Mutaffifin, 83:1 ‑ 6).

It may be pointed out that under‑weighing should not be regarded as confined to trading only. It has a far wider significance. At every stage of social life one should behave towards others as he expects them to behave towards him. It is not only those who handle a weighing balance that under‑weigh.

Revocation of contract
The parties to a contract of sale have a right to revoke if for a number of causes. It can be revoked:

(1) In the case of animals within, three days, a period during which all the characteristics of the animal should become clear.

(2) Before the parties disperse and leave the place where contract was made.

(3) If it is discovered that either party has been wronged to an appreciable extent.

(4) If the purchaser of an article subsequently discovers a defect in it.

(5) If the purchaser unduly delays the payment of the price.

(6) If the seller fails to give delivery of the article sold.

(7) In pursuance of an option stipulated in the contract for one party or for both the parties.

Inheritance
Inheritance is the best known instance of the forced transfer of property from one person to other individuals.

On the whole inheritance has a natural basis. What is the natural incentive to make economic effort? Normally the foremost motive of everybody is to meet his own economic needs and those of his family.

There is no doubt that, this is not the only motive of all economic activity, but it cannot be denied that this is the most natural and the most common motive.

As we pointed out in the course of our discussion of the family one of the strongest family bonds is the economic tie and the mutual responsibility of members of a family to meet the needs of each other.

As it seldom happens that at the time of his death a man may not have even a suit of clothing, or a bedding consisting of at least a mat or a rough blanket, the question automatically arises with his death as to what should be done with his belongings, howsoever insignifi­cant they may be.

The most natural answer to this question is that they should be put to the same use to which they were being put during his life time that is, to meet the economic needs of his family and near relatives.

If a person dies leaving no relative and no successor by contract, his property, whatever it may be, will go to the society in which he lived, and hence is given to the Bayt al Mall.

It may be mentioned that in Islam the official recognition of this natural transfer of the property of a deceased person to his relatives does not in any way imply that the hoarding of wealth for the heirs should become an economic goal of man.

There are many verses of the Qur\'an and a large number of traditions which emphasize that the produce of the labour of man is meant to satisfy the needs of himself and his family and the society and not to be hoarded to serve as valuable treasure for himself and his wife, children and kinsfolk. We propose to quote a few verses and traditions as an example while studying the question of hoarding wealth.

Division of inheritance
All that is left by a man has to go to his near relatives, but how?

There are different methods of this division under various economic systems. Islam also has its own method, which is summarized hereunder:

According to the Islamic law of inheritance the relatives are divided into the following categories:
(1) Husband and wife.

(2) Parents, children and grand‑children.

(3) Grand‑father, grand‑mother, sister and brother, children of sister and children of brother.

(4) Paternal uncle, paternal aunt, maternal uncle, maternal aunt and their children.

(5) Those with whom the deceased entered into a reciprocal contract that they would pay any fine or compen­sation to which he might become liable.

Each of the husband and the wife inherits from the other in all circumstances. But in the case of others a sequence is observed. Besides the husband and wife the property of a deceased goes first to his father, mother, children and grand children. If he did not have father, mother, child and grand child, then the turn of the next category, viz. grand‑father, grand‑mother, sister and brother or their children comes. If there is none of this category also, then the inheritance will go to the next category, viz. uncle, aunt and their children; and so on.

The share of each heir has been fixed by Islam according to a regular scheme. To know the details a reference may be made to Articles of Islamic Acts (Islamic Seminary Publication) or to some other book on the subject of inheritance.

Distribution of Wealth
Observation and social experiments under various social and economic systems show that from the point of view of physical and mental capabilities human beings widely differ from one another. What we are talking about is the innate and natural disparity and not that caused by social and economic injustice and privations which can be rectified by the removal of its causes. Such differences are caused by such factors as the lack or abundance of nutrition, the knowledge of its correct methods or the educational and training facilities, and do not constitute a natural disparity.

These differences should not be accepted as compulsion of destiny and every effort should be made to establish a just social and economic order.

However it appears that even after doing away with these artificial differences, there will still be variations in the physical and mental capabilities of the human beings, and their ways of thinking and doing will always differ even under the most equitable social and economic system.

As the result of this innate intellectual and practical disparity the proceeds of the economic effort of human beings cannot naturally be equal. Two fishermen go to the sea to catch fish. Both of them try from morning till evening. One of them does not catch more than fifteen fish, whereas the other on account of being more skilful catches within the same period of time and with the same amount of effort as many as sixty, viz. four times what the first man caught. In one year there is bound to be an appreciable difference in the economic positions of these two men. Hence, even if we admit that only proceeds of labour can be the foundation of personal property, we cannot avoid the emergence of differences in the economic level of human beings.

The above was the case of the difference in the level of the two healthy and fit persons. But we know that more or less in every society weak and disabled persons are also

found. Their economic position will certainly be far worse than even that of the low‑income group and they will in all probability be living below subsistence level. Hence even under an economic system based on the natural principle of `property is the outcome of labour\' we should come across `income less\', `low‑income\' and `high‑income\' groups.

Should we content ourselves by saying that it is a natural necessity and that we cannot fight against nature? Hence, should we leave the three groups to their fate? Should we let the high‑income group remain plunged into luxuries; the low‑income group committed to hard work; and the income-less group doomed to beggary and humiliation? Or should we think of some remedy?

This remedy has taken different forms under various economic systems. Anyhow, the main objective is the same, that is, to achieve more equitable distribution of wealth, and for that purpose to take something from the high‑income groups and to give it to the low‑income groups or to spend it to meet their requirements.

A prominent part of the economic teachings of Islam is devoted to the steps which this divine system has taken to achieve equitable distribution of wealth. Some of the actions which the Muslims should take for this purpose have been described by the holy Qur\'an as infaq (spending).

Spending
Islam has not left the high‑income people to themselves but has emphatically called on them to spend what they have in the way of Allah and for the welfare of the people.

The holy Qur\'an says:

"You shall never attain righteousness until you spend (in charity) what you cherish, and whatever you spend, Allah is fully aware of it". (Surah Ale Imran, 3:92).

Describing the characteristics of the believers, the Surah al‑Shura, 42:38, says:

"Those who obey their Lord and who keep up prayers and whose affairs are a matter of counsel and who spend (in charity) out of what We have provided them ".

These and many other verses of the Qur\'an exhort the rich to abandon love of money and spend it for the amelio­ration of the lot of the people.

The Surah al‑Baqarah, 2:177, warns the rich that they will not be regarded as the virtuous till they spend money in charity:

"It is not righteousness that you turn your face to the East and the West, but the righteous is he who
believes in Allah, the resurrection, the angels, the Book and the prophets; and gives his wealth for love of Allah to the kindred, the orphans, the destitutes, the wayfarers the needy for the redemption of the captives".

Having heard all these exhortations of the Qur\'an, some devout Muslims asked the holy Prophet what portion of their wealth they were required to spend. In reply the following verse was revealed:

"They ask you what they ought to spend (in charity), say: That which you can spare". (Surah Baqarah, 2:219).

The Surah al‑Hashr, 59:9, goes a step further and lauds those pious Muslims who in spite of being needy them­selves, gave preference to the needs of their brother and sister Muslims over their own:

"Those who had their homes in the city and had accepted the faith before their arrival, love those who migrated to them for refuge, and do not feel jealous for what has been given to them. They give preference to them over themselves even though poverty became their own lot. Those who are saved from their own greed, shall surely be prosperous ".

Generally speaking the Qur\'an wants that out of his property and extra lawful earnings a Muslim should use a part to meet the moderate needs of himself and his family and should spend the rest in the way of Allah and for the welfare of the people. Otherwise he will either be guilty of extravagance or will commit a bigger sin of hoarding both of which have been severely denounced by Islam.

There are many verses in the Qur\'an which denounce every kind of extravagance. We quote just one verse, as an example:

"It is He who produces all kinds of gardens (trallised and untrallised,) the date‑palm, the various
kinds of food crops, the olives and pomegranates, like each other and unlike each other. Eat o f their fruit when they yield fruit and pay the due o f them on the harvest day, and do not be prodigal. Surely Allah does not like the prodigal" . (Surah al‑An\'am, 6:141).

In this verse it has been laid down expressly that the entire produce of a field or a garden is not meant for the personal consumption of its owner. Others also have a rightful claim on it.

In the following verses prodigality has been censured thus:

"Give to the near o f kin his due and also to the needy and the wayfarer. Don\'t squander your wealth wastefully. The squanderers are indeed Satan\'s brothers and Satan is ever ungrateful to his Lord". (Surah al‑Isra, 17:26 ‑ 27).

Prohibition of the hoarding of wealth
The holy Qur\'an severely censures the hoarders of wealth and says:

"Those who board up gold and silver and spend it not in Allah\'s way unto them give tidings of a painful punishment. On the day when it will (all) be heated in the fire o f Hell; then their foreheads and their sides and their backs will be branded therewith and it will be said to them. This is what you hoarded up for yourselves. Now taste what you used to board".(Surah al‑Tawbah, 9:34 ‑ 35).

These verses were revealed along with the verses regarding jihad, and it appears that they refer to those who in spite of their financial competence evaded contribution to the war expenses. From these verses we may deduce a general rule that so long as society is in need of money nobody should think of amassing it for himself or his dependants.

To keep money stagnant has been especially denounced in Islamic traditions. This denunciation underlines another aspect of Islam\'s fight against hoarding:

Imam al Sadiq (P) is reported to have said to one of his companions:

"A man on his death leaves nothing behind heavier and more laden with responsibility than cash".
His companion asked, "Then what should he do with it?" The Imam replied, "He should invest it in a garden, a farm or a house".

Spending categories in the verse on `spending\' a number of categories have been mentioned, which may collectively be put under the heading of `the needs and the needy\'.

Among these categories we find the following headings:

(1) In the way of Allah:
"Those who spend their wealth in the way of Allah ". (Surah al‑Baqarah, 2:262).

(2) Parents and near of kin:
"They ask you (O Prophet) what they shall spend. Say: What you spend (in charity) must go to your parents and near o f kin" : (Surah al‑Baqarah, 2:215).

(3) The orphans, the needy and the way‑farers:
"To the orphans, the needy and the wayfarers ". (Surah al‑Baqarah, 2:215).

This category includes all those who are unable to secure means of living because they have lost the head of the family, are unable to work, do not find a job, are away from their homes due to journeying or immigration and have no means of livelihood.

(4) Expenses of Jihad:
A good number of verses are about spending on Jihadwhich includes the purchase of arms and equipment as well as providing the means of living to the fighters and their families.

On the necessity of such spending and its vital role in the security of human life the Qur\'an says:

"Spend your wealth for the cause o f Allah, and do not cast by your own hands to ruin, and do good. Surely Allah loves those who do good" . (Surah al‑Baqarah, 2:195).

An overall study of the verses and the traditions on the question of spending shows that in the economic field Islam requires that: Everybody should contribute within his limits to the expenses of the useful social activities.

There should be no one left in the Islamic society having no means of living. The rich should not think that their entire income belongs to them. They should realize that on a part of it there is a claim of other Muslims also.

The Qur\'an says:

"In their wealth there is a due share for those who ask for help and those who are under ‑ privileged ". (Surah al‑Zariyat, 51:19).

A society in which there are two classes of haves and have-nots is not an Islamic society.

The holy Prophet has said:

"He who sleeps satiated while his neighbour is hungry, is not a Muslim".

All this munificence should be to gain the pleasure of Allah and to serve humanity, so that the spender may attain spiritual progress and his brotherly relations with others may be strengthened.

Zakat
Zakat in its present sense is a stage of public spending in accordance with the special rules mentioned in the Islamic law. This sector of spending in fact ensures continuous flow of the resources from the rich to the poor and the very poor. It also meets the social needs.

The minimum limits on which zakat is due in various cases indicate who is considered to be rich under the economic system of Islam.

In the days when paper currency had not yet been intro­duced, precious metals like gold and silver were used for coins of higher value and cheaper metals like copper for small currency.

Those whose income did not exceed small currency had to pay, nothing on account of zakat. But those whose income was so much that they kept with them 20 gold coins each weighing about 4.61 grams or 200 silver coins each weighing about 2.42 grams for more than 11 months without using them, were required to give 1/40 of their hoard for being consumed for the cause of Allah and for the welfare of the people.

A farmer who gathered in from his field or garden at least 864 kilograms of wheat, barley, dates or raisins, had to give 1/10 of the produce if his field or garden was watered by rain, flood or overflow of a river, and 1/20 if he irrigated it himself.

A cattle‑breeder who fed his animals on pasture, had to give one sheep out of forty provided he possessed them for more than 11 months.

If he had thirty cows (includes bulls) for more than 11 months and did not use them as beasts of burden or draught he had to give one yearling calf which had entered the second year of its life. If he had twentysix camels for more than 11 months he was to give one yearling camel. If he had five camels not used as beasts of burden or draught for the same period, he was to give one sheep.

In certain traditions it has been expressly pointed out that zakat is paid to the poor to make the distribution of wealth more equitable.

Economic Responsibilities of the Islamic Rulers
One of the most interesting sectors of the economic teachings of Islam is that which relates to the financial and economic responsibilities of the Muslim government. There exist every detailed instructions in this connection but in this book we can deal only with a portion of them. On the whole the economic responsibilities of the government can be divided into two parts:

(1) Responsibility to meet the needs of the needy.

(2) Responsibility to provide guidance in the various sectors of production and distribution.

Public Treasury
Under the Islamic system a part of the income should go to the public treasury. It includes the following items:

(1) Kharaj, that is, a part of the revenue of the govern­ment lands granted to private sector for cultivation.

(2) fizyah, that is, poll‑tax levied on the non‑Muslims living in a Muslim country.

(3) Khums, that is, 20 per cent of the spoils captured during a war by the Muslim lands or against truth, justice and freedom. In a wider sense Khums is 20 per cent of the net income of every individual after the deduction of his personal, family and occupational expenses. It is also 20 per cent of the income derived from pearl‑fishing, extraction of minerals etc.

(4) The property of those who die and leave behind no heir.

There are also other sources mentioned in the Islamic law, income from which is to be deposited in the public treasury.

It is the duty of the Muslim government to collect income from all these sources and keep it in the public treasury to satisfy such needs as:

(1) Establishment and maintenance of educational and health institutions and centres for the spread of Islam.

(2) Defence of the land of Islam and the fight for freedom of other areas.

(3)Payment of the salaries, allowances and pensions of the government officials.

(4) Subsidy to the poor, who are not entitled to receive charity such as the descendants of the holy Prophet.

(5) Grant of relief to all the paupers.

If the public treasury has surplus funds after meeting all these and similar requirements, they should be spent on the general welfare of the Muslim Ummah, in accordance with the teachings of Islam and every individual should be given his due share.

The policy of the payment of subsistence allowance to the individuals was enforced from the very first century of Hijri era, and that is why we again and again come across reports in history by various persons that money was placed at their disposal to give it to the needy, and they made a search for them but were unable to find any.

The commitment of the Muslim government to provide means to all the needy people ensures that they should not be dependent even on the financial support of other Muslims.

Furthermore, in certain cases the Muslim governments are responsible to watch that the individuals discharge their financial responsibilities. In case they fail, it is the duty of the government to collect money from them and spend under its proper heads. That is why one of the official formations of the Muslim governments is an organi­zation for the collection of kharaj, zakat and the like.

In this connection the Islamic traditions have laid down very valuable rules to make the government action agreeable so that the spirit of this joint and several economic responsibility may not be damaged.

The duty of a Muslim government in the economic field is not confined only to the above mentioned activities. As we have already said guidance in the sectors of produc­tion and distribution also forms an important part of its duties. An overall study of the relevant traditions indicates that it is the duty of a Muslim government to keep a watch on the economic activities and to intervene wherever it finds that the methods of production or distribution are deviating from the Islamic standards.

While appointing Malik bin al Harith al Ashtar as governor of Egypt, Imam Ali (P) wrote to him a detailed letter on the policy and duties of government. Complete text of this important and thought‑provoking letter is available in our book Rationality of Islam and may be read by anybody who wants. We reproduce below some excerpts from it:

"Great care is to be exercised in revenue administration, to ensure the prosperity of those who pay the revenue to the State, for on their prosperity depends the prosperity of others, particularly the prosperity of the masses. Indeed, the State exists on its revenue. You should regard the proper upkeep of the land in cultivation as of greater importance than the collection of revenue, for revenue cannot be derived except by making the land productive. He who demands revenue without helping the cultivator to improve his land, inflicts unmerited hardship on the cultivator and ruins the State. The rule of such a person does not last long.

You are advised to treat well businessmen and artisans and direct others to do likewise. Some of them live in towns and some move from place to place with their ware and tools and earn their living by manual labour. They are the real source of profit to the state and provider of consumer goods.

While the general public are not inclined to bear the strain, those engaged in these professions take the trouble to collect commodities from far and near, from land and from across the sea, and from mountains and forests and naturally derived benefits.

It is this class of peace‑loving people from whom no disturbance need be feared. They love peace and order. Indeed they are incapable of creating discord. Protect them whether they are transacting business at your place or in other towns. But bear in mind that a good many of them are intensely greedy and are immured in bad dealings. They hoard grain and try to sell it at a high price and this is most harmful to the public. It is a blot on the name of the ruler not to fight this evil. Prevent them from hoarding; for the Prophet of Allah had prohibited it. See to it that trade is carried on with the utmost ease, that the scales are evenly held and that prices are so fixed that neither the seller nor the buyer is put to a loss".

A study of the duties of an Islamic government in the economic field shows that a Muslim administration should always be a custodian of public interests, especially those of the poor, and not a protector of the unlawful profits of the rich. We reproduce another part of the letter to Malik bin al Harith al Ashtar:

"Maintain justice in administration and impose it on your own self and seek the consent of the people, for, the discontent of the masses sterilizes the contentment of the privileged few and the discontent of the few, loses itself in the contentment of the many. Remember! the privileged few will not rally round you in moments of difficulty. They will try to side‑track justice. They will ask for more than what they deserve and will show no gratitude for favours done to them. They will feel restive in the face of trials and will offer no regret for their shortcomings. It is the common man who fights the enemy. So live in close contact with the masses and be mindful of their welfare".

An important social and economic principle
In Islamic traditions we meet with an important principle which has great economic significance.

From the Islamic point of view only those rulers can be called just who maintain their standard of living on a level with the low‑income group.

This principle is worth noting. The level of the life of a Muslim ruler should be equal to that of the poorest people living in his dominion, so that there may exist a real tie between him and the poor. Otherwise the poor are not likely to accept his leadership and rule from their heart and to give him their whole‑hearted support. The feeling of a distance between themselves and him will incite them to rise against him.

A tradition containing this important principle has come down from imam Ali (P):

Once he went in Basrah to the house of a companion of his, named Ala, to inquire .about his health. Ala had a big house. When the ruler of Islam saw the house, he said:

"What is the use of such a big house in this world. Were you not more in need of such a house in the Hereafter? Well, even now if you want to carry it there, convert it into a centre of hospitality, benevolence to the kindred and the defence of truth. Thus you can get salvation in the Hereafter by means of this house".

Ala said: "O Commander of the Faithful! I have to make a complaint to you against my brother, Asim".

"What has he done?"

"He has renounced the world and has assumed a woolen garb".

"Call him. here".

When Asim came, the imam said to him:

"You are an enemy of yourself. The Devil has hood­winked you. Why don\'t you have mercy on your wife and children? Do you think that Allah who has made all good things lawful for you, doesn\'t like you to use them? You are too insignificant to be treated that way by Allah". (i.e. He should be bashful before you and should apparently say that these blessings are lawful for you but should not actually wish that you should utilize them).

Asim said: "O Commander of the Faithful. You yourself use very coarse cloth and extremely simple food".

The imam replied: "My case is quite different from yours. Allah has enjoined on the just rulers to keep their life within the limits of that of the poor, so that the masses may have no misunderstanding". (i.e. they may consider themselves strangers to the ruler and deviate from the right path). (Nahj al‑Balagha, vol. 2).

On the basis of this important principle so expressly stated in this tradition, those who want to serve the Muslim ummah in the capacity of its rulers, should first clarify the position of themselves and their family with regard to their standard of living. If they are willing to lead the life of the poorest people living in their country, then and only then they should come forward, otherwise not.

In this way the ruler and his family will know that they can improve their economic position only if they pursue a social and economic program of ameliorating the condition of the poor. In other words, in Islamic society the rulers, from economic point of view, have a common destiny with the poor and not with the rich. Such rulers not only will not support the capitalists in their efforts of making unjust and excessive profits, but will also prove a great force to keep the cupidity of the rich under check, and will be an assurance for the implementation of social jutice of Islam.
Al-Islam.org

The Essentiality of Employment and the Importance of Trade and Industry

Endeavour and work are the base and foundation upon which the world of creation is established and these are the only guarantee for the survival of every creature. The Almighty Allah has equipped His creatures with suitable means with which they derive benefits and avoid losses.
Man, who is the most astonishing and sophisticated design of creation, has more requirements than any other creature. Thus he needs more endeavors with which he could meet his countless requirements and also maintain the family that he should naturally administer.
That is why Islam, which is a natural and social religion, considers working and earning as wajib for the people.
The Holy Prophet (S) states: "It is wajib upon every Muslim man and woman to earn halal money for his or her livelihood and subsistence [7] ."
Islam has not attached any importance to those who spend their lives idly. Whenever the Holy Prophet (S) saw a man whose strength and capability were surprising, he would ask: "Does he work?" If they said: "No, he is idle.", the Holy Prophet (S) would state: "To me, he has no respect.", meaning that an idle youth had no value to the Prophet (S) [8].
In Islam, every individual should choose one of the many professions and industries towards which the Almighty Allah has guided him to choose according to his own aptitude and interest. He should earn his living in this way, carry one of the burdens of society on his back, and try to provide the people with comfort.
The Almighty Allah states: "And that man shall have nothing but what he strives for (53:39)."
In short, Islam has made the strongest recommendations about working and acquiring sustenance and has not disregarded the importance of economic activities even in the most critical moments so much so that Al-\'Imam al-Sadiq (A) said to his friend Hisham: "Even during the war, when soldiers array in line and when the fire of battle is fanned, do not neglect your economic duty and necessary activities for providing your subsistence and follow your financial efforts in such difficult situations [9] .
Thus idleness due to laziness is strictly forbidden in Islam.
Denouncement of Idleness
It is clear from what has been discussed earlier that working and making effort is a right path that creation has provided for man to attain his prosperity by following it. Surely, deviation from the path of creation and nature, no matter how minor it is, will only lead to the detriment of man. In this case, deviation from a matter upon which the very foundation of life is established will lead to nothing but misery in this world and in the Akhirah.
This is why the seventh infallible Imam Musa al-Kazim (as) states: "Do not show sluggishness and tiredness in your work or else you will lose in this world and in the Akhirah."
The Holy Prophet (S) has cursed those who have got used to idleness and who put the burden of their life on the shoulders of others.
Today, psychological and social experiments have thoroughly clarified that most social corruptions are generated by idleness. It is idleness that disrupts the economic and cultural activities of the society and gives rise to all kinds of moral decadence and superstitions.
Agriculture and Its Advantages
Farming, which is the means for providing food for the society, is one of the most praiseworthy human professions due to its importance. Therefore, Islam has laid down great emphasis for choosing this profession.
The sixth infallible Imam Ja\'far al-Sadiq (as) states: "Farmers would enjoy more respectable positions than others on the Day of Qiyamah."
The fifth infallible Imam Muhammad al-Baqir (as) states: "There is no job better than farming and there is no benefit better than the benefit of farming, because benevolent and malevolent grazing animals and birds benefit from it and pray for the farmer."
The Holy Prophet (S) states: "A Muslim who plants a tree or cultivates a land from which people, birds, and grazing animals eat will have the reward of sadaqah (charity)."
Muslims are obliged to use their natural energy to the maximum, i.e., to the point where one of the religious leaders states: "If at the time when the world is to come to an end and the solar system is to collapse any one of you has a small plant in hand, he should plant it if he has enough time to do so [10] . This means that the idea of the collapse of the world should not prevent you from performing this noble deed.
\'Ali (as) states: "Curse and imprecation of Allah be upon one who has land and water, i.e., one who has natural resources at his disposal but does not use his human skill to take advantage of them and consequently lives in poverty and beggary [11] ."
Self-Confidence
It has been repeatedly mentioned under the section on "Beliefs" that the general planning of Islam is that man should worship none except Allah and should not pay homage and bow down to anyone but He Who is the Creator of the world.
All are the creatures of Allah and receive their subsistence from Him. No one has privileges over others except in respect of those things which are done for the sake of Allah.
Every Muslim should have self-confidence and should take advantage of the blessing of independence given to him by the Almighty Allah. Man must use all the means that Allah has bestowed on him to pass his life. He should not rely upon others and consider a partner for Allah and worship a new idol each day.
The servant should realize that he eats his own bread and not of the master. He should know that he receives the reward of his labor, not the tip from his master or lord. Every employee should believe that he receives the wages of his hard work, not the gift and gratuity from his boss, his office, the government, or the society.
After all, a free man should not rely on and pay homage to any but Allah; otherwise, internally, he will have the same meanness and servitude of polytheism that the idol-worshippers have openly.
Finally, it should be noted that self-confidence means that man should use his intrinsic capability in his life and should not rely on others. It doesn\'t mean that he should dissociate from the Almighty Allah and consider himself to be really effective as the source of all hopes and desires.
The Disadvantages of Relying On Others
Relying on others, that is, living on the support of others, means giving up human pride, honor, independence, and freedom. It is the source of all kinds of offences and social misdeeds which originate from meanness and degradation.
Whoever relies on others and fixes his eyes upon this or that person, indeed offers his will and commonsense for sale, for he should commit flattery and should do whatever (right or wrong, decent or indecent) they demand of him or order him to do.
He should resign himself to any disdain and scorn. He must practice xenophilism, agree to do any injustice and oppression, and at last consider all the limits and human laws as naught.
Asking for help in unnecessary cases is haram in Islam. Financial contribution to the needy, which is a part of Islamic provisions, only applies to those needy people whose earning is less than their expenses or to those who are disabled.
Imam reza network

The Role of Central Banks in Islamic Banking

"...ideologies…affect the topics discussed, the manner of discussion, the factors included or left out or inadequately stressed in arguments, comments, and models and attitudes shown, sympathetic or hostile,…to past and contemporary economists\' works and views. "
Based upon above statement it can be argued that there are a lot of differences between Islamic and conventional banking systems both at micro and macro levels. These differences are in approach, in concepts, and in the resulting behaviour.
My presentation is based upon the following primary and secondary assertions, which are the result of 27 papers and 3 books. The last book: "Comparative Money and Banking in Capitalistic and Islamic Systems", in 856 pages, has been recognized in February 2002 in Iran as "The Economic Book of The Year". These assertions and the final conclusion may seem rather unorthodox, but they are the product of their own logical reasoning. The essence of my paper is thus nothing but one of the logical consequences, among others, of the following assertions everybody is able to derive.
Primary assertions are those, which can directly be used to reach the final conclusion of this paper. Secondary assertions are key issues to be used, one way or another, to lead one to the problems in implementing Islamic Banking. These two types of assertions, however, constitute separable sets.
Based upon the fact that the primary function of banks is to deal with "money", one cannot speak about " banking" without referring to money. Hence, it seems a "must" to understand money first. Otherwise many Miss-interpretations may arise as the result.
Interest and profit, although being clear concepts, have been subjected to many misunderstandings. To be sure, let me make them clear at the outset. Interest and profit are rewards to money and capital investment, respectively. In other words, capital investment produces profits and money produces interest. Furthermore, it has constantly and mistakenly written and quoted by some writers that the price of money is 1 (unity). One is the exchange rate of money with itself; but the price of money is interest (rate).
Some of my findings about the nature and role of profits closely correspond to those of Prof. Adrian Wood in his seminal book " A Theory of Profits ". With the abolishment of interest (as it has in Islamic school of economic thought), the LM curve loses its total validity and becomes redundant and useless.
All in all, interest is a normative concept (basically discussed in schools of economic thoughts), which can neither be proved nor refuted by use of scientific tools of analysis. It is a value judgement. In evaluating an economic system, economists are supposed to take it for granted.
Assertions:
1. In economics we are basically dealing with two inter-related concepts; one is legal (or conventional) concept and the other is real concept. To distinguish one from another, one does not need to focus on the physical features of each one. All contractual agreements like marriage, ownership, organizational hierarchy, money, interest, and the like fall into the first category; while human beings, commodities, buildings, amenity, and the like are included in the second category. Each one of these two concepts is able to produce the other or be transformed into itself. Let us call these two properties " Completeness" and " Reflexivity", respectively. Hence, money itself being a legal concept is capable to producing another legal concept (actually its derivative) called "interest" or to produce real concept like capital equipment.
2. Money as a potential capital is a legal (conventional) concept capable of being transformed into actual capital. A simple example would be Mudarabah contract, among others, in which as soon as one person\'s money is legally combined with another person\'s labour force, the nature and the function of money is changed into capital. Given that in an Islamic framework there is no reward to money lending (i.e. interest being zero) yet capital (i.e. money\'s transformed version) is eligible for part of the profit earned.
3. Various modes of contract available to Islamic banks are the major source of transforming money deposits of individuals and firms into capital (or asset). Any type of financing under any modes of contract by these banks will essentially increase the value of the asset of the economy. However, some modes of contract like Musharakah and instalment sales (originated by firms) increase the productive capacity of the economy. Any positive change in the firm\'s asset values (rather than their capital values which is by itself a vague concept responsible for some obscurities) can be called " investment". Following this practice it is easy to calculate, rather than to estimate, the amount of investment, which has taken place in an economy during one specific year with relatively high precision. This can be done by reading the asset values off the current balance sheets, firms submit to tax authorities. By putting asset values, instead of capital, into the production function, not only it becomes more precise, but also meaningful. Firms\' rate of profit is, hence, logically defined as the ratio of profit to their assets. Since the value of firms\' assets is normally greater than their value of capital, therefore, the rate of profit defined as the ratio of profit to the value of capital, underestimates the true rate of profit.
4. Based upon J. M. Keynes\' criticism on the classical economists inability to recognize speculative demand for money in the presence of interest (rate), it can easily be shown that interest is both necessary and sufficient condition for speculation. In other words, there is a two-way relationship between interest and speculation. It is probably for this reason that he has also recognized commodities rates of interest in addition to money rate of interest that he was much concerned about. That is, whenever a commodity is speculated upon a specific rate of interest would emerge. With the abolishment of interest, speculative motive of the demand for money, logically derived from interest, would disappear. Speculation, which necessarily entails artificial risk in any market, be it in money, bond, gold, commodities and the like, is not permissible in an Islamic setting. All of these can safely be taken under the heading of "gambling".
A corollary to the above assertion is that with the disappearance of bond market stocks are expected to be exchanged in an Islamic stock market based upon their book values. In terms of Tobin\'s Q this quotient is supposed to be close to unity (one). It is because in a world with perfect markets, economic value (EV) and replacement cost (RC), will coincide. This brings the quotient to unity. An implication of this is that in a world with perfect markets valuing the firm would be easy; i.e. we could read the economic value of the firm off the current balance sheet. Risk is essentially interwoven with investment. It can be considered "natural" and hence permissible in Islam. However, impermissibility of artificial risk may be grounded upon the fact that any income received by speculator will eventually bring about excess demand for goods and services (without the speculator having any share in productive activities). This excess demand, in turn, becomes the main source of inflation.
Let me conclude discussing about this assertion by citing two statements correctly made by Prof. Gardner Ackley:
a) "Speculation - if mistaken - tends ultimately to be self -correcting in any commodity market. "
b) " ...the real cause of unemployment is speculative demand for money".
5. The natural consequence of elimination of interest, as said earlier, is the elimination of money market. Hence, the major motive to use money is for transaction purposes, which underlies the structure of ordinary demand and supply schedules for goods and services. Furthermore, based upon the logical statement that "the speculative motive is derived from money\'s use as an asset, as a store of value", money can no longer possess the "store of value function" in an Islamic framework.
In the absence of interest, money market and speculation, and all monetary policy tools used in conventional banking, would lose their validity in Islamic banking. Let us call the policy followed in this new setting "Financial Policy". The unique and powerful tool of financial policy is to determine the share of profit relative to that of capital for all investment projects submitted to Islamic banks. This is probably the most important role a central bank can play in an Islamic banking. There are many factors underlying the determination of this share, especially in the face of natural risk.
This share if effectively used would make bank\'s sources of finance properly channelled into asset building processes without worrying about money whirlpool to emerge. To determine equilibrium in this market the relative profit rate of the Islamic bank (call it financier) to that of the investor (call it the financee) can be constructed. This rate is especially useful in cases where different risks are involved. To prepare a list of different risks involved in various investment projects is another important task of a central bank.
6. Western economists have always and justifiably been worried about unnecessary expansion of money supply the volume of which is hard to control by central banks. This is due to the fact that considerable portion of it (very difficult to determine if not impossible due to uncertainties involved in interest rates) goes to money whirlpool. This is probably the reason Prof. Milton Friedman in his paper addressing the problem of stabilization policy has advocated the Required Reserve Ratio (RRR) to be raised to one hundred percent. It is clear that such a banking, if possible, would lose its own entity and merely becomes safe-deposit office. If Islamic banks are prohibited to lend on interest nonetheless different modes of contract, as mentioned earlier, are available to them to finance specific needs of both firms and individuals upon their proper requests. If constant and effective supervision is conducted on a random basis by the central bank the chances are very slim a money market, which could be outlawed, to be developed. So the kernel of Islamic banking is Profit and Loss Sharing (PLS). By preparing accurate information and making them available to the general public, central bank in Islamic banking system would be able to provide symmetric information and prevent moral hazard, to a great extent.
7. Money\'s inability to be a tradable entity and its production and volume being closely watched by the central bank (which is apart of the public sector), seems appropriate to be classified as "Impure Public Good" in an Islamic state. For the sake of brevity some properties of (impure) public goods which also applies to money, in this setting, will be outlined as follows:
a) Non-existence of money market.
b) Elimination of speculation.
c) Demand for it can be constructed by vertical summation of individual demands.
d) Externality of money can be derived from its capability of becoming actual capital; hence, government\'s (i.e. central bank\'s) intervention. Furthermore, it benefits each person simultaneously and is thus equally available to each person. Simultaneous benefit is not a "must" for a "thing" to be public. A good example is highway. Highways do not generate simultaneous benefit to all individuals; they are equally available to all individuals. Non-exclusion principle also applies here. Additional individuals looking for money may be added at zero marginal cost.
e) Indivisibility of money refers to its purchasing power and not its physical character.
f) Its velocity is greater than unity implying that one is not supposed to "capture" it as opposed to the case of private good whose velocity is unity implying that it can be "captured".
A caveat is in order here. Money has two distinct attributes; one at micro and the other at a macro level. At the micro level, it is part of the asset of an individual possessing it. But at macro level it cannot be added to the assets of the economy. To count money as wealth (or asset) of a nation will lead one to commit both fallacy of composition and double counting problem. This property of money may be the only one that makes it distinct from other "public goods". This could probably be the consequence of money being the medium of exchange.
8. Removal of interest and all its derivatives (i.e. lending on interest, money market and speculation) from an economy will lead Islamic banks to finance investment projects through PLS. The criteria to be used by such banks are both profitability and feasibility of the projects. Hence, projects compete with each other on the bases of their Internal Rates of Return (IRR). However, the criterion used by a potential investor is IRR of a specific project. The role of the central bank in determining arrays of IRRs for different sectors and various activities is highly valuable in channelling resources into proper projects.
Ranking IRRs in descending order, an investor would first choose the project with the highest IRR. However, the rule, which seems appropriate in choosing the amount to be invested, is "cut-off rate". The maximum amount one investor is willing to invest in a project is determined by the IRR of the next project whose value is almost equivalent to the chosen project, without it being "the opportunity cost" of capital.
Cut-off rate, seems to me, has long been mistakenly interpreted as opportunity cost. In investment decision making most of the times we are ~ dealing with the cut-off rate concept (even in an interest based economic system) but very rarely with opportunity cost. In capitalistic system, rate of interest is justifiably used as the opportunity cost of capital. It is well justified that interest rate is essentially determined independently from the rate of return in the real sector of the economy. However in the absence of interest, projects compete with each other to obtain finance from Islamic bank on the basis of their IRR because there is no other alternative. Comparison among various IRRs brings about the role of cut-off rate without anyone of them becoming opportunity cost of another project. Cut-off rate functions as a signal to show an investor up to what point he should invest and where to stop and select another project. Interdependencies among various investment projects produce cut-off rate the special character and function of which differ from those of interest rate.
The reason, seems to the author, that we often fail to distinguish between these two concepts is the interdependence condition. Furthermore, choosing one, IRR of one project as the opportunity cost of another project in the same activity (on the basis of the principle of next best alternative) will lead one to a whole range of so-called opportunity cost list, none of which have possibly the same value. Hence, different cost calculations in the same activity. Whereas cut-off rates could be numerous for many producers in the same activity without making them run into any problem.
In the absence of interest rate there is nothing to compare IRR of an investment project with. Therefore, we can conclude that in an Islamic economy opportunity cost of capital is zero. The foregoing statements were justified on the basis of economic logic; accountants do not seem to have any reason to believe otherwise. One final remark can be added to above statements. Opportunity cost of capital can also be used as the cut-off rate but the reverse is not true.
After their feasibility and profitability have been confirmed by Islamic bank\'s qualified personnel, projects become eligible to obtain finance; furthermore, the projects themselves become collateral for finance. Central bank\'s role in providing guidelines about both of these two aspects will certainly be appreciated by Islamic banks.
As long as there are unemployed factors of production suitable to be utilized in investment, projects have to be financed by Islamic banks no matter how much money is required to finance them. This gives appropriate apparatus to materialize the assertion made by S. M. Bagher Sadr when he says; "Tools of production are treated servants in Islam and man the master". It is the right of labour, in Islam, not to be kept unemployed.
In the final analysis, every piece of bank note coming out of an Islamic bank in response to financing an investment project can be called Certificate of Asset Building (C.A.B.). These C.A.B.\'s are appropriate both to production and household sectors.
9. In dealing with various modes of contract, Islamic banks finance profitable and appropriate projects. Appropriateness of projects are expected to be determined by the central bank; however, to determine which projects are more profitable to finance is the task of each individual Islamic bank. Central bank\'s task is to instruct Islamic banks to give priority to those projects, which are more compatible with the country\'s economic plan (be it either explicit and written or unwritten and implicit).
Islamic modes of contract can be classified into two broad categories:
1. Those with variable return and (2) with fixed return. Musharakah and Mudarabah contracts fall into the first classification and Instalment Sales, Hire-Purchase, Joalah, and the like into the second one. Musharakah (i.e., PLS) has well and rightly been recognized as the core of Islamic banking. In Mudarabah contract labour has no responsibility as to any loss that may occur provided that it had done its best. The second class of contracts may be defined as auxiliary contracts, which could be used in conjunction with and after the first category has been utilized. Risk is involved with the first type but the second is risk less which is more appealing to Islamic banks. To reduce or even to eliminate the burden of risk from the shoulders of investors it requires another paper, which IS beyond the scope of this presentation.
However, to make sure that the guideline controlling the complementarity of the second type contracts has properly been observed, the Islamic central bank is supposed to keep close eye on the contracts signed by each individual Islamic bank. I skip going into the mechanism of how the burden of risk can be lessened or even eliminated; to determine the degree of risk in different sectors and regions throughout the country. This is another crucial task of an Islamic central bank. This will facilitate the task of Islamic banks in determining the relative share of their own profit vis-à-vis that of the investor. This task not only is beyond the capabilities of an individual Islamic bank, but also provides a uniform procedure for all Islamic banks for various sectors, locating in different regions of the country.
10. Whether an Islamic bank uses the variable or fixed- rate-of-return contract, accountants are very keen about costs that are supposed to be deducted from, total revenue. Accountants who are responsible to approve and submit both balance sheets and profit and loss statements to tax authorities do not accept anything under the heading of cost from neither of the two types of contracts provided that they have been financed by Islamic banks. It is a fact that economists use these two valuable documents for economic analysis and their own interpretations without being able to adjust them on the basis of their own interpretation of cost. Nevertheless, neither of the two professions (accounting and economics) can deny that the Islamic banks\' share of profit paid by investors (i.e. financees) is in fact sort of dividend which is essentially determined after all costs have been subtracted from revenue and hence can no longer be considered cost.
To sum up the role of a central bank in an Islamic state, we come up with six different crucial functions to be performed at different levels of rigorousness:
a) Active participation in the process of preparing economic development plan.
b) Informing individual Islamic banks about the priorities of investment projects as outlined in the country\'s economic development plan at different regions and various sectors.
c) Calculating and submitting to Islamic banks the profit shares of banks relative to those of capital for different projects at various regions and sectors.
d) Calculating and submitting to Islamic banks the value of risk involved in different projects, different regions, and various sectors of the country.
e) Constant inspection and supervision to make sure that projects have properly been financed relative to the priorities and the value of risks.
Note: To do all above functions effectively an Islamic central bank is supposed to be well equipped with highly qualified personnel in portfolio and risk management and project appraisal. This is also a must for each individual Islamic bank.
f) After making sure that Islamic banks have concisely followed the central bank\'s instructions they can safely be allowed to gradually reduce RRR down to zero.
Let me admit that monitoring cost in Islamic banking compared to the conventional banking is relatively high. However, potential benefits as to its effects on reducing unemployment and keeping prices constant over-shadow the cost. Most important, distribution of income and wealth is expected to be more equitable than otherwise. Such a scheme of distribution guarantees sustained economic development. The role of an Islamic central bank in a uniform distribution of information and prevention of moral hazard cannot be overstated.
Whether it is the Islamic banking or the realization of Keynes\' expectation to reach full employment, it is yet to be seen. In closing my presentation, I would like to cite what Keynes has to say about this whole issue: "If I am right in supposing it to be comparatively easy to make capital goods so abundant that the marginal efficiency of capital is zero, this may be the most sensible way of gradually getting rid of many of the objectionable features of capitalism."
Nonetheless it seems that these two models, in the final analysis, converge. He, in this respect, admits that "...it is to our best advantage to reduce the rate of interest to that point relatively to the schedule of the marginal efficiency of the capital at which there is full employment."
Imam reza network

Islamic Economy: Its Ideological and Legal Foundations

Every system, intending to achieve certain goals, must be designed in a realistic manner. Therefore, if the system is supposed to be implemented in order to serve human life, particularly in the long-run, it must serve man\'s goals and be consistent with his fitrah (primordial nature). This is not possible unless the designer of the system has a command over the knowledge necessary for understanding social and individual aspects of man. Besides, the designer should have a thorough understanding of actual relations between those two aspects of man and the primordial nature of man as well. In addition to those prerequisites, the designer should understand the historical trends of such a relationship, the needs for the development of such relationships and methods for pursuing those needs in order to realize an evolutionary, human approach toward actualizing the goals of the creation of man.
Indeed, the way the aforesaid satisfaction of needs is to be carried out should not overlap other systems which are meant for satisfying other needs of man. In other words, such a system should observe a wise balance and study the role and interrelationship of other systems which together comprise the whole system of life.
If we assume that the designer of the system possesses all those necessary prerequisites, we should assess subsequent stages in the process of achieving the desirable realism which is necessary for a system to be able to provide a proper context for itself. By this we mean the extent to which this system is compatible with the norms and values of the society (where the system is to be implemented), the extent of consistence between those norms and values and the emotional values presented by the system, and finally the extent to which this system assures the realization of a desirable education to create social obedience for those ideological views and emotional values.
Although the system may be realistic, accurate, and rational in perceiving the reality and understanding its needs and their satisfaction, it will remain incapable if it is not preceded by an ideological impetus which supplies the society with bases for the stance that it should take toward the universe, the life, and the man itself. Consequently, the ideological impetus will guarantee the system the element of ?m?n [faith] rescue it from the most important civilizational maladies including ilh?d [atheism], which is the opposite of ?m?n, and shirk [polytheism], which signifies the excessive belief in false gods, and shakk [doubt], which is a manner resembling other destructive attitudes. Unless these requirements are realized, we cannot assure the provision of the first contextual element for the system\'s implementation. Similarly, as long as the emotional motivations, which are the focus of education, are not perfectly compatible and harmonious with the ideological structure of the society, we cannot guarantee balance in man\'s personality when there is a wide gap between his beliefs and the internal and external values and motivations that the system provides in order to satisfy his needs. Moreover, these emotional motivations cannot form human behavior and action unless they are strong and clearly defined.
So far, we have realized the necessity of two factors for every system intending to materialize its human goals: first, the planner\'s holistic approach towards human reality, including his relations and needs as well as their fulfillment concomitant with the rest of the system; second, facilitating its implementation through faith and compatible emotional motivations.
Realism, in turn, requires the following two fundamental factors: first, the system should contain legal guarantees binding all those who oppose the harmonious human nature or those few who have not chosen the complete ?m?n or the full commitment to the requirements of ?m?n; second, it has a perfect flexibility to accommodate the temporal and spatial variations in human life and provides fixed solutions for fixed elements of human life and flexible ones for the accommodation of its alterable elements.
We believe that Islam was correct in announcing its rule in the form of general rules. Thus, it did not ignore any one of those aspects, but observed them perfectly and completed the religion which provides appropriate answers to man\'s needs till the Day of Judgment.
Accordingly, it announces that the whole Islamic system is based on reality and nature and that it is the fixed truth aiming at serving human beings and accomplishing the purpose of his creation. Thus, it enjoins whatever is desirable and forbids whatever is refused by the nature.
God, the Exalted, says: "Then set your face upright for religion in the right state, the nature made by Allah in which He has made men. There is no alteration in Allah\'s creation. That is the right religion but most people do not know." (30:30)
And He, the Exalted, says: "Say: O people! Indeed there has come to you the truth from your Lord ..." (10:108)
And He, the Exalted, says: "O you who believe! Answer (the call of) Allah and the Apostle when he calls you to that which gives you life, and know that Allah intervenes between man and his heart, and that to Him you shall be gathered." (8:24)
And He, the Exalted, says: "Those who follow the Apostle Prophet, who was taught neither to read nor to write, whom they find written down with them in the Tawr?h and the Inj?l [Old and New Testaments], (who) enjoins them to do good and forbids them from doing evil, and makes the pure and good things hal?l [lawful] for them and makes impure and harmful things har?m [prohibited] for them, and remove from them their burden and the shackles which were upon them. So (as for) those who believe in him and support him and help him and follow the light which was sent down with him, they are indeed the saved." (7:157)
The proof of this argument is the same one that proves its attribution to the Great Creator as it proves for this Creator all attributes of knowledge about all facts and full, absolute control over the formation of shar?`ah (the comprehensive body of Islamic rules), and perfect kindness to the servants and other attributes which are not imaginable for any body other than Him the Exalted.
We are not to present any reasoning for this but only point to the Holy Qur\'?n\'s emphasis on this fact in all occasions when it points to Allah\'s kindness and knowledge:
"Does He not know Who He created? He it is Who made the earth smooth for you, therefore go about in the spacious sides thereof, and eat of His sustenance, and to Him is the return after death." (67:14-15)
"Say: Allah suffices as a witness between me and you. Surely He is Aware of His servants, Seeing. And whomsoever Allah guides, is the follower of the right way, and whomsoever He causes to err, you shall not find for him guardians besides Him. And We will gather them together on the day of resurrection on their faces, blind and dumb and deaf. Their abode is hell, whenever it becomes allayed We will add to their burning." (17:96-97)
After this introduction, we try to discuss several points pertaining to the core of the discussion with emphasis on the following subjects:
1. Major attributes of the Islamic economy, their natural character, and
Islam\'s emphasis on them.
2. The proper grounds Islam prepares for its economic system.
3. Relationship between this system and other systems.
4. Flexibility of the Islamic economic system.
Salient Features of the Islamic Economy
When we study the Islamic economy as a way which Islam prescribes for individual and social behavior in the economic field and examine Islam\'s rules in this area, we can conclude that its most important attribute is social justice. In this respect, the Islamic economy resembles all other systems that claim to be serving human being and realizing his social aspirations but it differs from them in the details of its conception of social justice.
Justice cannot emerge unless the following requirements are present: first, believing in the private and social property on an equal and advanced level in a way that the private property acts on the fulfillment of man\'s natural demands for possessing the result of his effort and obtaining the benefits of his business. While the public property aims at guaranteeing that social action enjoys a social product through which the provision of some needs and shortages would become possible.
Second, faith in individual economic freedom as a general, continuous, comprehensive principle which stems from the nature of the ownership along with the belief in the existence of some limits at which this freedom ends. This is for the purpose of either guaranteeing individual\'s interest as in the case of objects the use of which was outlawed because of the physical or moral damage that they could inflict upon the individual, or to secure others\' rights and liberties which is also a natural guarantee admitted by all religions and human affiliations.
Third, faith in the principle of mutual responsibility. Islam guarantees, for every individual in the Islamic society, the subsistence level, i.e., provision of his natural needs. The government is obliged to provide this minimum for all and it is absolutely impermissible that even a single needy person is found in the Islamic society. Regarding how to make the society economically capable of doing this, the following factors may be mentioned:
Obliging individuals to accomplish their responsibilities and duties with respect to the provision of the necessary needs of others. Since one of government\'s responsibilities is to compel individuals to perform their obligations, even those which are individual, it may bind individuals to carry out these duties as well.
The legal power of wal?y al-amr [head of the Islamic government] to determine the limits of public domain through legislation supplies the government with the desirable power.
Public properties and anf?l [properties with no particular owner/s] which are designated by the government as public properties which the government oversees and uses to achieve the above goal.
Financial punishments and methods that are devised by Islam to transfer private properties to the public ownership as with respect to mawq?f?t [endowments] or the lands the inhabitants of which perished or the dead without heirs and so forth.
Nature of the Islamic legislation--as Shah?d al-Sadr (r) put it--which aims at strengthening the social structure for the realization of this mutual responsibility.
Fourth, belief in the principle of social balance and refusal of the class system in the Islamic society. We came to know through the third point that the required minimum is to provide subsistence for all individuals. As far as the maximum is concerned, it may be assumed through the following factors:
1. The prohibition of tabdh?r and isr?f [wasting and squandering] in all areas, therefore, an individual cannot possibly trespass to the line of isr?f.
2. The prohibition of every action that leads to misuse of particular properties, and of lahw [amusement] and muj?n [impudence].
3. Rejection of all social and economic privileges which discriminate between different groups of people which, in turn, eliminates all the grounds for the emergence of the class system.
If we go back and scrutinize all of these features and expose them to human nature and conscience we will find them principles that may be admitted in a natural way. This explains the return of each of the two extremist systems of capitalism and socialism to a moderate position after its collision with opposing natural factors--as we believe.
The natural basis of these views is evidently emphasized by general regulatory and conceptual authoritative texts (nus?s) that are numerous and to some of which we point here:
There are nus?s that stress the inherence character of private and public property:
The Exalted says: "And the man shall gain nothing but what he strives for." (53:39) (naturally if we interpret it as including worldly possession).
Am?r al-mu\'min?n (`a) says: "This property is indeed neither mine nor yours but it is a collective property of the Muslims ... what is earned by their hands does not belong to any mouths other than theirs." (Nahj al-Bal?ghah, sermon 232)
There are some nus?s that emphasize the economic freedom in a natural form the clearest of which is the rule on which all fuqah?\' [Islamic scholars] rely, namely the rule [people are in control of their properties]). Naturally, there are some limits to this freedom which are mentioned by other nus?s stressing that this restriction is only for the benefit of the individual and the society.
There are some nus?s that emphasize the inherence of mutual responsibility and cooperation and further consider all kinds of negligence with respect to this principle as a general rejection of d?n [faith and religion]. The Exalted says: "Have you seen the person who rejects the religion? He is the one who treats the orphan with harshness, and does not urge (others) to feed the poor." (107:1-3)
Finally, there are some nus?s that stress the necessity for the realization of balance in the society through their emphasis on the prohibition of isr?f and also the necessity of renouncing poverty and providing subsistence for every individual. The Im?m (`a) says, while speaking of the duties of the wal?y al-amr [leader] toward the needy: "He keeps giving him from zak?h till he makes him needless."
The Proper Grounds Which Islam Prepares for Its Economic System
In this regard, the analyst can find in front of him a huge wealth of noble nus?s that emphasize various concepts and numerous rules and fixed historical laws and that all serve the cause of Islamic economy and participate, in a natural way, in the realization of its far-reaching goals. We mention below a number of these issues:
A. The Real ownership belongs to Allah, the Exalted:
This principle is the most important tenet that forms man\'s image as it leaves its visible marks on the economic behavior of Muslim individual. Ownership belongs only to the Unpaired, Almighty Allah and He the Exalted bestowed an assumed, legal ownership upon the human being so that it distributes the properties among its individuals and exercises this ownership according to the purposes that Allah chose for the benefit of humanity. This notion has great influence on the exclusion of negative effects on ownership in its absolute capitalistic form.
B. The purpose is to reclaim the land through a joint, human effort and responsibility:
In this way, the man believes that the human effort from the beginning to the end is one and that the important goal is to make the humanity subservient before God, establish the worshipping society and prepare the grounds for it through making the earth inhabitable, extract the greatest benefits from it to the advantage of all through performing the duties arising from the joint responsibility. Diversion from this is diversion from the purpose.
C. Ethical concepts in the service of economic cause:
Islamic nus?s are full of a magnificent ethical plan which leads to its contribution to this economic system and to the realization of its goals. Most of the riw?y?t [traditions], on one hand, encourage in the human being the spirit of cooperation, responsibility, Islamic fraternity, ith?r [self-sacrifice], zuhd [piety], and compassion for the miseries and aspirations of others. On the other hand, they drive away from the human being such vices as stinginess, greed, exclusivism, transgressing the rights of others, opportunism, avarice, and envy. Im?m S?diq (`a) counted all good manners as the troopers of `aql [wisdom] and all vicious attributes as the troopers of jahl [ignorance]. We can neither mention all of the riw?y?t in this regard nor touch on their educational details, therefore, only point to this particular fact that the Islamic ethics and educational system augment in human being the spirit of generosity before they emphasize the economic freedom and the possibility of using it to his own particular benefits. The story of Q?r?n [Korah] is well-known for its focus on this ethical principle (And seek by means of what Allah has given to you the otherworld\'s abode and do not neglect your share of this world ... (28:77)).
This story and this principle is a multifaceted Islamic creed which, if prevails in the society, will provide the greatest grounds for the implementation of the desirable economic system.
D. Al-inf?q al-mustahabb [commendable spending for a divine cause] and the extended life:
Here, a wonderful aspect of the solution to the problem of conflict between the inherent motivations for serving one\'s self and the motivations for serving the society is manifested. According to this notion, one begins with the prolongation of his own life and ends up with a level of eternity in the hereafter. He finds out that self-interest and social interest are integrated; a notion that encourages him to make continuous inf?q which does not ever run out of its driving forces according to the principle which says "whoever establishes a favorable habit he will be rewarded both for it and for the action of whoever follows it." And here we would like to remind emphatically the extended effect of waqf since, as the result of these motivations, the private property is transferred to the public ownership and man\'s permanent exploitation of his property is realized.
E. Shukr al-ni`mah [gratitude for a blessing] means to make the best use of the wealth and avoiding its waste:
The major problem in the global economic domain does not lie in the weakness of growth rates of natural resources and their failure to keep up with the population growth rate but it lies in the failure to make ideal use of natural resources or, as the nus?s put it, in kufr?n al-ni`mah [ingratitude for the blessing] and squandering the natural, mineral and animal resources and so forth (And He gave you of whatever you asked Him for and if you count Allah\'s blessings you will not (possibly) obtain their number. Man is indeed very unjust, very ungrateful. ... (14:34))
And it is a kind of shukr al-ni`mah to make ideal use of he labor force and to avoid wasting it. For this reason, the nus?s emphasize the continuous work and even declare it obligatory for those who are able.
F. Relationship between moralities and material pursuits at the civilizational level:
There is an amazing civilizational fact that nobody can perceive it except those who believe in the ghayb [the metaphysical world] and its various aspects. The Holy Qur`?n stresses that ~ulm [injustice] leads to hal?k [annihilation] (Thus, because of their injustice We destroyed them) and that \'adl [justice] and du`?\' [praying] and shukr [gratitude] leads, in a lawful way, to rakh?\' [comfort] (Ask for your Lord\'s forgiveness, surely He is the most Forgiving. He will send down the cloud upon you pouring down abundance of rain. And help you with properties and sons, and make for you gardens and make for you rivers. (71:10-12). This fact arouses, in hearts, a great hope in the future, even the material future, and opens the way for a social and economic dynamism.
Add to what was mentioned above other major factors that contributes to this background.
Strong Connection with Other Systems
It is evident in all systems devised by Islam that they are put forward as parts of a larger system which includes, in general, the whole universe. These systems are in strong and close interconnection in such a manner that none of them can achieve its desired goal without the implementation of other systems (and naturally, we do not claim here that the obligation to set up the system hinges on the establishment of other systems but what we emphasize is the issue of system\'s achievement of all of its desired goals.)
In this regard the following points should be made:
A. Certain areas of the social system are reserved to be filled by the wal?y al-amr (or by some one appointed by him) due to his ijtihad [ability to extract Islamic rule whenever needed] and determination of the nature of the prevailing situations and ummah\'s interest. This is what we observe, for example, in economic, legal, and penal systems and in the institutions of waqf [endowment], mu`?mal?t [transactions], irth [inheritance], and so forth. This fact indicates the complete connection between these institutions and the ruling political system.
B. The economic system is strongly related to the system of `ib?d?t [worshippings]. This is the issue which is sometimes presented as the companionship of the prayers and zak?h in tens of Qur\'anic cases. Zakah and khums are two financial `ib?dahs. Financial kaff?r?t [expiations] are, in fact, also a huge economic participation by `ib?d?t system in the service of public economic interest. It should not be ignored that some `ib?dahs like sawm [fasting] and hajj provide the elements of economic grounds, to which we clearly pointed. There are certain `ib?dahs that strongly contribute to the public ownership such as waqf, if we require n?yyat al-qurbah [proximity intention] in it.
C. The economic system and its goals and pecularities naturally have a strong connection with the system of mu`?mal?t [transactions] which is designed in such a manner to provide the proper environment for the realization of mutual responsibility, balance, and dual ownership, emphasize the labor element, and prohibits rib? [usury], [financial misappropriation], harmful acts, lahw [debauchery], and wasting of the wealth.
D. There is a considerable linkage between the economic system and the system of jih?d [military defense] in Islam for the latter system involves, in addition to combative rules and methods, implications for ownership, war spoils, and so forth.
E. Undoubtedly, the economic system is also related to the social system including the form of society\'s principle cell, i.e. the family, and also the social relations among the families, and individual\'s relations with the society. All of these are predominated by social Islamic rules including mutual responsibility and balance, which form the most important characteristics in the economy as we mentioned frequently. This argument also involves the rules regarding mahrs [dowries], nafaqahs [allowances], various methods of division of labor, and such issues as irth [inheritance], was?iyyahs [bequests], and the rulings with regard to children, qa_?\' [adjudication], financial ta`z?rs [discretionary punishments] and other varieties of financial punishments, and others which may not be all discussed in this limited space.
G. Touching on these relations, the late ?yatull?h al-Sadr points to another aspect of the issue, namely the relationship between government\'s economic doctrine and its financial policy which is, in fact, a part of government\'s planning for enforcement of the laws of Islamic economy, thus, it is a part of the economy itself.
H. We already pointed to the link between Islam\'s economic system and its ethical system which makes the latter one of the major preludes and the motivating element for the ummah in the way of implementing the economic system and realizing its goals to such an extent that it becomes hard to distinguish between the two systems.
Here I would like to point, as a diversion from the main course of discussion, to the fact that Islam addresses the whole life in general and devises for it the best system which guides toward the goal in a deliberate manner and based on principles of justice and equity. Whereas we find the positivist world today floundering in the establishment of a desirable system for the protection of human dignity, distribution of responsibilities, and realization of rights. Therefore, social systems collapse, one after another, and admit their defeat while Islam remains a straight religion without any deviation.
As an example for this argument, we focus on the slogan which the positivist world spouts through giving it a widespread global character and which has recently altered to a sweeping emotional wave, namely the slogan of equality of women and men in all situations, periods, and places, and with respect to all rights without any exceptions whatever it would be. We have been finding this slogan tens of times in the documents presented in the conferences of Mexico City, Bucharest, Cairo, and recently in a strong and explicit form, in the Beijing Conference on Woman. We see the document produced by this conference concentrating, specifically, on the issues of inheritance, absolute material equality, judgeship, and the so called sexual freedom rights for all ages and so forth.
We consider this slogan as a blind assertion although it has an attractive appearance since equality is one of the principles favorable to the human taste concerning two individuals whose rights are equal in terms of their human dignity and affiliation, i.e. the man and the woman. But this principle is not too general to have exceptions. This is due to the natural differences between man\'s and woman\'s physical and emotional structures, nature of the social responsibility which is to be carried out by each, and the extent of participation by each in the social construction including the establishment of social justice. Hence, we may not call out the slogan of quantitative equality without considering the desired balance otherwise we will commit, through this equality, injustice and unfairness. When the principles of equality and social justice are in conflict, one may ask to which one the priority goes? Undoubtedly, the principle of justice is the one which common-sense testifies to its generality and insusceptibility to exception, therefore, social justice qualifies the principle of equality and even determines its socially desired form.
We feel great regret on the blind, sweeping, global wave that has been put forward thoughtlessly and that criticizes against the Islamic inheritance system pretending to ignore that it is part of a whole and that there is a wonderful balance between this system and the nafaqah [allowance] system and the duties of each of the man and the woman in the social life.
The Flexibility of Islamic Economic System
This subject is, in general, related to the flexible character of Islamic rules but we will show it from the economic angle. Briefly, Islam supplied this system with all necessary elements which enable it to accommodate the vital changes which occur frequently and rapidly in the economic field. The reason is that economy is a field related to the complexities of man\'s social life as well as to nature\'s ability to provide, and the proper environmental conditions, and so on. Therefore, with respect to land distribution and ownership, there is a great difference between the situation of land\'s perfect abundance and man\'s insufficient physical power and the situation of scarcity and increasing shortage resulted from human growth rates on one hand, and man\'s immense technological power to reclaim the land. This difference may affect the issues of occupancy -which is considered as an ownership factor-, social development, mines\' ownership, vertical ownership -both in depth and in altitude-, energy\'s ownership, etc.
This difference may also influence the issue of alteration of the nature and effects of property relationship leading mujtahids [jurists] to keep aloof from the issue of absolute ownership of land and suggest the subject of exclusivity right which results from the impact made by the individual on the land, thus when the impact ceases to exist the right will expire and returns to the public domain which can be used by the Islamic state according to the public interest.
Therefore, existence of the element of ijtihad and its constant openness represents one of flexibility elements without which one cannot know the developments\' effects on the nature of the rule deduced form the nus?s.
The fact that Islam put forward certain broad economic rules and related them to the `urf [prevailing standards of conduct] concept has a special connotation for notions like isr?f and tabdh?r [wasting and squandering], faqr and ghin? [poverty and needlessness], al-nafaq?t al-muta`?rifah [customary allowance], al-manfa`at al-muhallalah [lawful profit], ma`?n [basic need], rib? [usury], mithl?yyah and q?m?yyah [fungibility and being ad valorem], circulation and depression of cash currencies, _am?n [liability], individual and social damage, haraj [impediment], _ar?rah [urgency], al-maslahat al-`uly? [the higher expediency], being asbaq [preceding] in waqf, being `aqd?y [contractual], being bay`?y [exchange], trade through tar?_i [mutual agreement], being qimar?y [gamble], lahw, and even `ad?lah [justice], ~ulm [injustice], ta`add? [transgression], and misappropriation of property. Thus, `urf intervenes when these concepts change, often due to change in conditions, and consequently, as a result of change in the `urf? [commonplace] view of the subject the judgment also changes as we saw in the issue of shatranj [chess] for example.
However, the most important element on which the Islamic system concentrates is the element of intervention by the mujtahid, just wal?y al-amr in the economic life. This intervention has its own criteria, rules, and what the late al-Sadr calls the penetrating beams that illuminate Islam\'s positions and give it the spirit of the system and its promising goals1. In such a system, the wal?y has the obligation to take advantage of his social power and true commitment to Islam and the Islamic expediency of the ummah and, through consultation with the masters of knowledge and expertise, carry out his duties which can be summarized as the following:
1. Identification of the best methods and executive arrangements for the enforcement of the fixed rules of Allah, e.g. looking for the best way to eliminate rib? in the society while preserving the positive activities performed by the banks.
2. Filling the public domain with laws in accordance with the supreme Islamic expediency while preserving, as much as possible, the primary rule regarding the various cases.
3. Determining the extent to which the conditions are favorable for the enforcement of Islamic rules and institutions. Therefore, if the faqih finds the conditions and the rules in such a serious incompatibility that is called by the scholars of us?l as taz?hum [conflict], namely taz?hum between the wuj?b [obligatoriness] of implementing the hukm [ruling] and the prohibition of resulting evil consequences, he must produce the best possible solution to facilitate the implementation of the hukm while compensating its mafsadahs [damaging results]. If this appears to be impossible he should shift to the area of tarj?h bi al-ahamm?yah [preference based on priority] which is a vast area that follows the opinions of experts and mujtahids. The situation may reach to a point that due to the priority of preventing the mafsadah caused by it, the implementation of a certain hukm is suspended. This area is an accurate and a delicate one which is not to be resorted to except in rare situations.
Conclusions
Based on what was discussed above we can briefly highlight the following practical conclusions:
First, we repeatedly see or hear those who suggest the idea of cross-combination of ideology and system which signifies the establishment of a socialist or a capitalist economic system in an Islamic environment or the implementation of Islamic institutions in secular social structures. When these combinationists do not achieve desirable results from their efforts they tend to ignore the contradiction between the system and its implementation context and place the blame on the system itself. We may mention two experiences as examples here:
1) the experience of establishing socialist systems in our Islamic world and their quick failure as in Algeria -- during Houari Boumedienne\'s presidency -- and Libya.
2) the experiment of setting up al-qar_ al-hasan [interest-free loan] funds under secular systems where it was struck with unsatisfactory results that encouraged the opponents to attack the resulting situation as cacophony and accusing the planners of neglecting the absence of favorable conditions.
Second, If we wish to achieve good results in our Islamic community, we must provide the desirable grounds through deepening the faith in Allah and disseminating the elevated Islamic ethics, explicate the Islamic concepts related to economics and convey them to the public, and strive to mobilize the feelings and sensations and give them a desirable Islamic shape. As long as we do not accomplish this task we should not expect ideal results. In this regard, I would like to draw your attention to some advertising tactics employed by the banks which concentrate on the profits generated by the money deposited in al-qar_ al-hasan funds and on prizes that it may bring for the depositors without ever referring to the great reward which ensues whenever they participate in the revitalization of the public economy and server the society through their bank activities and deposits and without mentioning the noble ayat and ah?dith which call for such deeds.
Third, we propose that Islamic banks form a fiqh? committee consisting of prominent scholars, and further, that the mujtahids in al-hawz?t al-`ilm?yyah (Islamic theological schools) undertake a study about the legitimacy and plausibility of the proposed economic, financial, and banking systems from the viewpoint of Islamic laws and constantly express their opinions concerning new forms for such systems.
Bay` al-salam [forward sale], and bay` al-salam al-mum?thil [fungible forward sale],manufactured sale, tawr?d [mutual forward] contracts, murabahah [resale with stated profit] contracts, and so on are examples of economic institutions that provide banks with more alternatives for economic activities. This is what the late Shah?d al-Sadr proposed a quarter of a century ago through his famous proposal known as rib?-free banking and what I put forward as the draft law for the prohibition of rib? in the Islamic Republic of Iran. Ijtih?d is indeed a source of blessing and Islamic rules are overflowing reserves that can undoubtedly help us to safeguard the Islamic character and spirit and overcome the difficulties caused by the developments of modern life.
Notes:
1. These goals include, for example, Qur\'?n\'s emphasis on avoidance from creating a situation that causes exclusive circulation of wealth only among the rich, and its emphasis on the necessity to prohibit the manipulation of the property which Allah made the sustenance of the ummah, or the emphasis by some nus?s on the view that the purpose of trade is to extract benefits or on the prohibition of hajj if its opening results in evil consequences and so on.
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The Economic System of Islam: Its Ideology

The Ideological Basis of Economic Activity

The ideological basis in Islam may be summarized into six basic principles:

The cornerstone is that everything has to start from the belief in God as the Creator, Lord, and Sovereign of the universe. This implies willingness to submit to God’s will, to accept His guidance, and to have complete and unqualified servitude to Him. This means that Muslims - individually and collectively - should not imitate or emulate any other system if it differs from their particular principles, for example, the system of usury or interest.

The second basic principle is that Islam, as a religion, is a complete way of life; something that guides a person’s life in all its aspects: the moral, social, ethical, economic, political, etc. All of these aspects are based on the guidance of God. Therefore, it is not a question of the person’s acceptance of God’s teaching in one matter and the refusal of acceptance in another. Everything has to be within that basic guidance.

“…And we have revealed to you in stages this book, a clarification of all things, a guidance, a mercy, and glad tidings…” (Quran 16:89)

A third principle is that God created human beings on earth as His trustees, which means that everyone is created to fulfill a certain responsibility on this earth. God has entrusted human beings with free will in order that they live their lives according to the moral and ethical values that He Himself provided. In addition, Islam provides an opportunity in material progress, thereby combining moral, social, and material progress, all interlinked in harmony.

The fourth principle is that God, in order to help humankind to fulfill the responsibility of trusteeship, has made everything in this universe subservient to them. There are many verses in the Quran that suggest this meaning, such as:

“God is He Who made subservient to you the sea that the ships may run therein by His command, and that you may seek of His grace, and that you may give thanks.” (Quran 45:12)

This does not mean, however, that humans are given free reign to use and abuse the resources God has provided us however we choose. Rather, there are many verses that urge humankind to harness the various resources that God has made available to them on this earth responsibly. Humans are encouraged to enjoy of the good things that God has created, but they are to do so within the boundaries that He has given. Doing so is not regarded as sinful as long as it follows His path and does not transgress His limits. God says:

“It is He Who produces gardens, with trellises and without, and dates, and tilth with produce of all kinds, and olives and pomegranates, similar (in kind) and different (in variety): eat of their fruit in their season, but render the dues that are proper on the day that the harvest is gathered. But waste not by excess: for God loves not those who waste.” (Quran 6:141)

The fifth principle is the principle of accountability in the Hereafter. God has given human beings trusteeship and resources. This means that every single person will be questioned on the Day of Judgment as to how he or she behaved whilst enjoying his or her earthly life. This, of course, includes our economic behavior. God says:

“And then on that Day (the Day of Resurrection) you will be called to account for every comfort and delight [we bestowed upon you].” (Quran 102:8)

The sixth principle is that the variation in wealth among people in itself does not give a person either inferiority or superiority. Rather, poverty and affluence are in the total control of God Who, out of His Infinite Justice and Wisdom, has specified these things for whom he chooses.

“Indeed God increases provision to whom He pleases and straitens it [in regards to others]…” (Quran 13:26)

Affluence, like poverty, is also seen as a trial from God, one through which it is seen what one will do with their wealth – indulge oneself or use constructively in ways legislated in the religion, God says:

“Your wealth and your children are only a trial, whereas God! With Him is a great reward (Paradise).”(Quran 64:15)

After being bestowed with numerous gifts and bounties and a kingdom incomparable to any other on the earth, God in the Quran narrates that Solomon said:

“…This is from the bounties of my Lord, to test me whether I will be thankful or ungrateful…” (Quran 27:40)

God is not concerned with the amount of wealth a person may have amassed, their beauty or color, but rather, His measure of honor is the piety of the hearts. God says:

“On humankind! Indeed We created you from a male and female, and we made you different nations and tribes, that you may come to know one other. Indeed the most honored amongst you are the most God-conscious.” (Quran 49:13)

The Prophet also said:

“Indeed God is not concerned with your appearances nor your wealth, but rather your hearts and deeds.” (Saheeh Muslim)

As one can immediately surmise from these principles that the Islamic economic system is radically different from others, due to the difference of the values upon which it is based. In a capitalist society, one may see certain rules of economics which take precedence over moral and ethical values due to the intrinsic nature and values of that system. The same may be seen in communist, socialist and other societies as well. From the principles mentioned in these articles does the Islamic system of economics spring, striking balance between personal benefit and the benefit of society as a whole, as well as mundane profits and spiritual gains, all which ensure that one gain the Pleasure of the Lord of the Worlds.

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Economics: Concept and Purpose in Islam

In part I of this article, we had examined the prevailing opinions of both religious and secular Muslims, as well as the prevailing system of Zakat in some so-called Muslim countries. We had concluded that the concept and practice of Zakat has been reduced to a lifeless ritual by means of which the rich believe they can gain entry into Heaven in the Hereafter. On the other hand, our Prophet ( pbuh ) acted to establish the Deen of Allah Almighty in Medina by implementing the system of Salaah and Zakat as spelled out in the Quran. In this part we will look closely at this system of Zakat .
If Zakat is one of the pillars of the Deen , it stands to reason that this pillar must stand on a firm foundation. That firm foundation is comprised of each Muslim's unshakable conviction, 100% commitment, utter sincerity, and complete dedication to the belief that the Allah-owned resources on the planet must be made available to all creatures and human beings for their sustenance, nourishment, and growth.
The Arabic word Zakat , with its root Z -K -W means growth and development. A tree is nourished and grows in the presence of Allah-owned resources such as the soil, the rain, the sun, and the air (56:63-72; 80:24-31). Any interference in the flow of any of these resources will retard the growth and development of the tree. Similarly, any individual, group, government, or system which disrupts the natural flow of Allah-owned resources on the planet to all human beings creates an imbalance in society: the rich/poor, the master/slave, the owner/worker. In the West, this awareness is dawning in respect to plants, animal and insect species which are becoming extinct due to this imbalance in nature caused by the actions of human beings.
However, the global economic imbalance continues to grow unchecked because human beings have refused, in their greed, to believe in the basic economic principle of Zakat : unrestricted flow of resources to all human beings (41:10, 50:11, 55:10, 56:73, 79:33, and 80:32).
The capitalist New World Order of the West actively seeks to control the natural resources of weaker nations under the guise of "global economic security." Using the United Nations as a tool, the weak are intimidated into submission either through economic sanctions or military force. Allama Iqbal beautifully captured this mentality of the powerful when he said: "Hai wo sultan ghair ki kheti pe ho jiski nazar." (The master is one who always has an eye on others' lands.) Muslims, too, have abandoned the Quranic Zakat , which is Allah's assured challenge to this naked exploitation of the weak by the strong. Unlike other religions, Islam is a Deen , a system of life, a constitutionally-run, collective life that encompasses the social, economic, political, judicial, and military aspects of a community. The leaders of this community are not priests, or scholars, or the rich, or the strong: they are the most upright who commit to upholding the laws of Allah Almighty in the land, " Amr bil ma'aroof " (enjoining what is right) and " Nahya 'anil munkar " (forbidding what is wrong). They make sure the Quran, the Constitution of Allah, is en acted i.e. put into action.
What then, is the position of the Quran on the Economic World Order that should prevail, in other words, Zakat ? The Quran emphasizes the importance of economics in human life. While describing the life of Heaven, the Quran says there will be no hunger and no misery there.
"There is therein (enough provision) for thee not to go hungry nor to go naked." [Yusuf Ali (20:118)]
Too, the Quran teaches us to work for the good of this life, as well as the hereafter (2:201, 7:156), in contrast to the mindset of those who consider economic prosperity in this life to be an end in itself. According to the Quran, such people live at the animal level:
"Verily Allah Almighty will admit those who believe and do righteous deeds, to Gardens beneath which rivers flow; while those who reject Allah Almighty will enjoy (this world) and eat as cattle eat; and the Fire will be their abode." [Yusuf Ali (47:12)]
Taqwaa (righteous works) includes the use of economic prosperity to achieve a higher and nobler goal (10:63-64, 16:30). Economic prosperity is a means, not an end; it is a source for life, not the end of life; it is a prerequisite for growth and development in life, not the final goal of life. Since economic prosperity is so essential to human growth and development, Allah Almighty has addressed the issue of Zakat in great depth in the Quran.
To begin with, Allah Almighty says He is Rahman and Rahim :
"There is no moving creature on earth but its sustenance dependeth on Allah: He knoweth the time and place of its definite abode and its temporary deposit: All is in a clear Record." [Yusuf Ali (11:6)]
"How many are the creatures that carry not their own sustenance? It is Allah Almighty who feeds (both) them and you: for He hears and knows (all things)." [Yusuf Ali (29:60). Also see verses (6:152) and (17:31)]
Allah, of course, does not personally feed anyone: And when they are told, "Spend ye of (the bounties) with which God has provided you," the Unbelievers say to those who believe: "Shall we then feed those whom, if God had so willed, He would have fed, (Himself)?- Ye are in nothing but manifest error." [Yusuf Ali (36:47)]
Allah Almighty fulfills this promise by creating the resources for the nourishment and growth of all moving creatures. No one, therefore, has the right to own or control the Allah-given natural resources or to restrict their flow to humanity at large (107:7, 17:20). Otherwise, this is tantamount to belying the Deen of Allah Almighty (107:1-6). Any association or partnership with Allah Almighty in this respect is Shirk , an unforgivable sin in the sight of Allah. Allah Almighty says:
"Join not anything as equal with Him; be good to your parents; Kill not your children on a plea of Want- We provide sustenance for you and for them ." [Yusuf Ali 6:151]
Secondly, Allah Almighty is clearly the real owner of the resources He has created. The following verses in the Quran leave no doubt about this:

The earth and all its resources belong to Allah. It is such an obvious fact that no one can deny it (6:12, 10:31, 29:61 &63, 31:25, 34:24, 39:10 &38, 43:9).
· Allah Almighty is the inheritor of the earth (19:40). The earth has been created for the benefit of all (55:10).
It has been created to provide nourishment for all (56:73).
To Him belongs all that is in heavens and the earth, "La hu ma fissamawati fil ardh" (2:116, 2:255, 4:171, 5:40, 14:2, 16:52, 20:6, 22:64).
"Lillahi ma fissamawati fil ardh" (2:284, 3:109, 3:129, 4:131,132, 5:40, 10:55, 10:67, 14:2, 16:52, 20:6, 21:19, 34:1, 42:4, 42:53, 53:21).
"Lillahi miraathus samaawaatti wal ardh" (3:180).
As Owner, then, Allah Almighty has given us these resources as a trust which we are required to disburse according to His Will (the system of Zakat ), which is, to make available to all living creatures according to their needs, without any hindrance or control, the sustenance and provisions of life.
It was the Prophet's ( pbuh ) unshakable conviction, his utter commitment, and total obedience to this system of Zakat that led to the establishment of the basic infrastructure of a universal, welfare-based economic system in Medina
Shirk - Associating Other Owners Besides Allah Almighty to the Ownership of the Earth
Since Allah Almighty owns the Earth and its resources, then no one else can be an owner. A simple example illustrates this well: I wish to buy a piece of land. The seller and I sign the papers, and legally, I become the new owner. But if we carry this process back far enough, a point will come where this mutual deal will come to an end. Someone must have acquired that land illegally at first without any mutual agreement. Now, in legal jargon, any illegally acquired property, no matter how many times it is bought and sold thereafter, remains illegal. So, how can I say that "I" am the "legal" owner of that land? In my own defense I may claim that I acquired the land "legally," or that it is not my responsibility to worry about someone else's very first illegal acquisition of that land, or that I bought it from halal earned income, so I "own" it. But it does not change the reality - I am involved in a deal which was Shirk to begin with. And, as long as I believe in "my ownership," I am involved in Shirk .
Brothers and sisters! It is not difficult to understand this kind of Shirk if our hearts and minds are open and sincere. According to the Quran, Muslim believers are required to enter into a contract with Allah Almighty in which they must sell their life and wealth to Him in exchange for Jannah : "Allah Almighty hath purchased of the believers their persons and their goods; for theirs (in return) is the garden (of Paradise)" [Yusuf Ali 9:111]
But, if we cling to the attitude that we own our life and wealth (in violation of the above ayah) then how can we practice and establish Zakat ? First, this Shirk (having two owners, Allah Almighty and us) has to be slowly and gradually eliminated before the tree of Zakat can take firm root in a land rooted in Tauheed (with Allah Almighty only being the owner of everything including our lives) and not in Shirk (in which others are also owners along with Allah). That is where Sadaqaa or charity comes in.
What is Sadaqaa ?
Our Islamic scholars interpret both Zakat and Sadaqaa as charity. And whatever instruction Allah Almighty has given in the Quran in the following verse for Sadaqaat they attribute it to Zakat .
Alms [Sadaqaat] are for the poor and the needy, and those employed to administer the (funds); for those whose hearts have been (recently) reconciled (to Truth); for those in bondage and in debt; in the cause of God; and for the wayfarer: (thus is it) ordained by God, and God is full of knowledge and wisdom. [Yusuf Ali (9:60)]
But, first of all, why would Allah Almighty use two different terms if they mean exactly the same thing? It does not make sense. Secondly, the Arabic language also does not support it. While the root meaning of Zakat comes from Z-K-W , meaning growth and development, the root meaning of Sadaqaa comes from the root S-D-Q , meaning truth and power. Therefore, all the words that are derived from this root will have these two meanings (truth and power) embedded in them. Siddeeq is one who proves his trust and belief by his actions. As-Sadaqatu is anything that is given in the way of Allah Almighty voluntarily to prove one's promise and belief in Him as opposed to Zakat , which is compulsory [Tajul 'Uroos]. Therefore, Sadaqqa has a different purpose in Islam than Zakat and both cannot be equated with each other. How can income tax (a compulsory thing) be equated with charity (a voluntary thing)? .

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