Comment on Dr. Munawar Iqbal Development of Theory of Islamic Economics

 Comments on Dr. Munawar Iqbal:
Development of Theory of Islamic Economics: Problems and Proposals
by Dr. Asad Zaman

Workshop on “Islamic Economics at Crossroads,” held at King Abdul Aziz University, Jeddah,  27-28 Al-Hajj 1433H (Nov. 12-13 2012)

1.   Defining Islamic Economics

I would like to express my appreciation and admiration for Dr. Iqbal’s work, which does not suffer from the common problem of uncritical acceptance of western thinking. I have recently written a paper entitled “Re-Defining Islamic Economics” which deals with essentially the same problem that Dr. Iqbal has addressed in this paper: how to define Islamic Economics. I believe that his definitions are definitely a step in the right direction, and a vast improvement over a number of others available. However, some further improvements are required as I will point out in this comment. Let us start by his definitions:

For Theory:“An organized system of knowledge, comprising both the knowledge acquired from human experience and learnt from authentic Revealed Sources, which applies in a variety of circumstances to provide plausible explanation of a specific set of phenomena”.

As I have discussed in my paper cited above, I believe that the struggle to bring economic justice must be an essential ingredient of any Islamic economic theory. The western idea of knowledge posits a passive observer. Islam requires us to intervene. Thus knowledge is not a collection of ideas, but a methodology for bringing about justice. Thus our theory must include methods for changing the world towards the good. Enjoining the good, forbidding the evil, and establishing the commands of Allah pertaining to economics are all essential ingredients of a theory of Islamic economics.  This requires the knowledge referred to in Dr. Iqbal’s definition, but it also goes beyond that. This knowledge must be used to struggle to bring about change – if it is acquired but not used, then the knowledge will be a burden and a witness against the one who had it. This transformative aspect of Islamic methodology for economics is highlighted in my paper “Re-Defining Islamic Economics”.

For Islamic Economics:“Islamic economics is that branch of knowledge that tells us the rules of behavior in earning and spending wealth in the light of Shariah”

Similarly, we must extend the above definition by Dr Munawar Iqbal: Islamic economics is the EFFORT to change behavior at the level of the individual, community, and the Ummah, to bring it in conformity with the laws of the Shari’ah. It is not just knowing the rules of the Shari’ah, but also the process of bringing it from the books into the lives of the Muslims.

2.  Reasons for Crisis
Dr. Iqbal has given a list of reasons for why Islamic economics has failed to create genuine alternatives to conventional economic theories. I believe that the main reason has been the uncritical acceptance of western theories. I have explained this in detail in my paper “Crisis in  Islamic Economics: Diagnosis and Prescriptions.”

3.   Do we need (a separate) Islamic Economics?
I believe that Islamic teachings by themselves, without adulteration or borrowing ARE a separate and radically different paradigm. The teachings the Quran are far superior to those of Samuelson, and they are opposites of each other on key issues. Understanding this, the question itself need not be asked. The contrasts between Western economic theory and Islamic Economics have been brought out in my paper “An Islamic Critique of Neoclassical Economic Theory.” A capsule summary of the fundamental difference between the two is given below:
According to conventional economics the fundamental problem is scarcity, and it can be solved by increasing production. This solution cannot work for a very simple reason: wants expand as growth takes place. This is shown by many different kinds of empirical evidence, one of the most striking of which is Easterlin’s paradox.

Islam offers a radically different solution: Moderation in consumption, which is half of economics according to Hadeeth. If we spend on others the excess of what is beyond our needs (as the Quran recommends), instead of “accumulating wealth” as recommended in western economics, this will solve the problem of scarcity. Why? Because there is enough production to satisfy the needs of everybody.

A more detailed discussion is given in my article “Islam Versus Economics”.

4.  The Way Forward
A summary of Dr. Munawar Iqbal’s suggestions for how to improve affairs is listed below:

(i)    Take a multi-disciplinary approach to decision making.
(ii)    Borrow good ideas (from the west) that do not conflict with Shariah.
(iii)    However filter out the bad ideas.
(iv)     Revise the terminology of conventional economics.

 I believe that the way forward lies in relying solely on the guidance from Allah. See my comments on Dr. Fahim Khan’s paper for a further elaboration of this idea. I believe that the idea that “conventional economics and capitalistic/materialistic system has made tremendous contribution to increasing human welfare in the last three centuries” is wrong. In fact, these theories and systems have caused tremendous harm to humanity, and brought the entire globe to verge of environmental disaster. This issue has been elaborated in my paper “The Rise and Fall of the Market Economy.” I have clarified elsewhere that what the West calls progress is the accumulation of wealth. This is not considered progress in Islamic terms. Given that the best of the times was the time of the Prophet, this was not a time of high wealth,but one of high human development, spiritually, morally and in terms of character. It is well established that the character of the West has declined in the last three centuries. Therefore, instead of progress, there has been (moral) decline, accompanied by increases in wealth. For example, Gertrude Himmelfarb has documented the decline of morality in the West in her book: The De-Moralization of Society: From Victorian Virtues to Modern Values. Since this is not progress in Islamic terms, there is no need to imitate. As an empirical matter, I challenge Dr.Munawar Iqbal or any economist to find a good idea in Western economics anywhere – one that has not already been given a better formulation in the existing corpus of Islamic teachings and history. I assert that there are no such and hence we do not stand in need of borrowing from the West. Allah T’aala has given us complete and perfect guidance in economic affairs.
As far as terminology is concerned, I don’t think this is a crucial issue. However, we do not need to start from conventional and modify it. Rather, we should start from an Islamic foundations and adopt modern terminology where needed.

5.  References:

Asad Zaman “An Islamic Critique of Neoclassical Economics,” Pakistan Business Review, April 2012,
Asad Zaman “Crisis in Islamic Economics: Diagnosis and Prescriptions,” Discussion Paper, Journal of KingAbdul-AzizUniversity: Islamic Economics, 25: 1 ,(April/May 2012). Download from <>
Asad Zaman “Response to Comments on ‘Crisis in Islamic Economics’”. Rejoinder, Journal of KingAbdul-AzizUniversity: Islamic Economics, 25: 2, p.227-250,(Sept.  2012). Download from <>
Asad Zaman: “Islam Versus Economics” submitted to Islamic Studies, journal of Islamic Research Institute, International Islamic University of Islamabad:
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Asad Zaman: “Re-Defining Islamic Economics” paper prepared for the 9th International Conference on Islamic Economics and Finance.

Asad Zaman: “The Rise and Fall of Market Economies,” Review of Islamic Economics, 2010, Vol. 14, No. from: <>


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