Comments on “ Ishkaliyat al Tanzir fil Iqtisad al Islami ”

Comments on “ Ishkaliyat al Tanzir fil Iqtisad al Islami ” by Dr. NejatullahSiddiqi
By: Dr. Asad Zaman

Prepared for conference on “Islamic Economics at Crossroads” held at Islamic Economics Institute, KAAU Jeddah, November 12-13, 2012
Overall I would say that there is a remarkable amount of agreement between the comments of Dr Mohammad NejatullahSiddiqi (abbreviated to MNS herafter) and my own views. Difference occurs in ways of articulation and shades of emphasis, but these only serve to clarify and sharpen the points of view asserted. This agreement is remarkable because our diagnoses are not in fact, consensus or majority viewpoints. Most the of views expressed differ sharply from what are currenty mainstream views. I will list below what I consider to be the major issues raised by MNS, and re-express them as points that I have raised as central in my own writings, and related works.

1: Focus on Process, Not on Outcomes
In my own paper on “Re-Defining Islamic Economics”I have stated the Islamic Economics is the struggle to realize the orders of Allah in our personal lives, in our communities and at the level of the Ummah.” In this connection, I have written that our focus must be on the process – the struggle – and not on the outcomes. We will not be asked about whether or not we achieve the goal, but about whether or not we put in our best efforts to translate the ideals of Islam into real world practice. On this crucial and central issue, I find myself in complete agreement with Dr. NejatullahSiddiqi who states that:

The way to success is to try our best. Actual transformation of the ground reality into the desired state of the world depends on factors Allah knows best. To be realistic, ‘transformation’ is never complete or perfect. As we gain some ground, the world moves on, creating new challenges.

This is important because currently this is a minority position. Vast majority of Muslims are using outcome based thinking, and evaluating efforts on the basis of results. This is exactly the western methodology we have all been trained on, but is conflict with Islamic methodology.I have discussed the dramatic methodological differences between current economic methodology based on logical positivism and Islamic views in my paper on “Logical Positivist Methodology and Islamic Economics”. Some implications of a process based approach are discussed in Section 10 of my earlier cited paper “Redefining Islamic Economics” as well.

2. Shifts in Power Configurations Require Re-thinking Alliances
The first section of the paper by MNS makes the point that we need to shift from confrontational to cooperative strategies. I am in complete agreement, but would articulate the issue from a different perspective. The emergence of Islamic economics took place in a context where Capitalism and Communism were competing economic ideologies. Both were competing to attract the newly emerging former colonies to the folds of their influence. In this climate Islamic Economics was developed as a rival and a superior alternative. It was necessarily confrontational. The situation has changed drastically. Communism has been buried and Capitalism has emerged as the sole victor. However it has been a “Dark Victory” as many have come to realize. It is the victory of the top 0.1% — the military-industrial complex that Eisenhower warned was a serious threat to democracy (see Eisenhower speech). World defense budgets totalled 160 trillion dollars in 2010, which was enough money to provide health, education, housing and clothing for the entire planet. Why? Exactly as Eisenhower foresaw, the military-industrial complex encourages wars which hurt everyone but fatten corporate profits. Massive propaganda power acquired by corporate ownership of media allows them to corrupt democracies, and mislead people to vote against their interests.
In this new situation, the problem has been articulated by the “Occupy Wall Street” movement as that of protecting the interests of the 99% against the top 1%. The evils of the tremendous amount of inequality have been spelled out be Stiglitz in his recent book: The Price of Inequality. Just as an illustrative statistics, there ratio of prisoners to citizens in the USA is at the highest globally and historically. More is spent on prisoners than is spent on educating children. The cost of security systems to protect the property of the haves from the have-nots is enough to feed and educate the entire planet. A crucial element in the re-configuration of powers is the decline of nation as a uniting concept. Capitalists have joined hands globally, and are no longer reluctant to exploit the poor of their own countries. As a result, even in the richest countries, there has been a dramatic increase in inequality, and the conditions of the lower income population as a whole have worsened. Homelessness and hunger in the USA are at peak levels for a quarter century in 2010 according to FDA statistic. This, in an economy which has spent 7 trillion dollars on wars and bailouts of rich corporations, is an extreme injustice.

Islam has always championed the poor and exploited, and called for economic justice. At this time, there are numerous groups working for the 99% and we can definitely seek to make common cause with them, exactly as Dr Siddiqi has suggested.

3. Importance of Non-Monetary Incentives
The second section of MNS makes some points about the need to study incentives. I fully agree, not only that this needs to be done, but also that this is should be a high priority item on the agenda of Islamic Economists. In this regard, I have written the paper “Contrasts between Islamic and Economic Views of Incentives.” Whereas economics views man as motivated primarily by greed, Islam teaches us that humans have diverse motives. Many studies show that in the labor market, motives of learning, curiosity, demonstrating competence and expertise, providing service, feeling appreciated and honored, are all far more powerful than earning money. A recent award winning Ph.D. thesis by my student SaimaMahmoodentitled “Efficiency Wages and Non-monetary Motivational Strategies: An Experimental Approach” has discussed in detail the evidence for this, and the effects of taking these alternatives into account on the labor market. Cristina Bicchieri’sbook  onThe Grammar of Society: The Nature and Dynamics of Social Normsshows the importance of social norms in shaping human behavior. This has dramatic implications of great importance to Islamic Economists. Motivations are not set in advance, but depend on how children are brought up; if we choose, we can train them to be selfish and competitive. We can also train them to be generous and cooperative.  This ties in directly to Islamic teachings and the importance of providing the correct education and upbringing to Muslim children. A great problem in this regard is the complete bankruptcy of the Western education system. The complete failure and abandonment of moral goals in higher education has been documented by Harvard Professor Julie Reuben in her book entitled “The Making of the Modern University: Intellectual Transformation and the Marginalization of Morality”. The disastroustransformation of education from a tool for enlightenment and self-transformation into a tool for producing docile workers has been documented by Gatto in several books; see for example “Dumbing Us Down: The Hidden Curriculum of Compulsory Schooling”.  This means that it is up to us Muslims to demonstrate the model of education to the world. Since our Prophet was the best of teachers, was sent as a teacher and a perfect role model, we should not have to look elsewhere. The principles of an Islamic Education have been sketched in my paper on the subject: “Principles of an Islamic Education.” Muslims currently have a unique opportunity in this regards: we have a huge amount of literature and historical experience in providing a moral education. The secular world lacks a solid basis for morals, since their concept of moral boils down to social consensus [1]. Islam provides solid basis for providing moral training of exceptionally high standards. We need to learn to implement this in our societies. Several efforts are already underway, and these need to be strengthened and nurtured.

4. Global Thinking: Ummah and Humanity Versus Nation-States.
One aspect of Section 3 of MNS has already been covered in our earlier section on making common cause with the exploited 99%. The other aspect is the need to think globally, and to counter-act the poisonous effects of the nation-state. In Section 9 of my own paper on “Re-Defining Islamic Economics” I have discussed how Islamic Macroeconomics should concern itself with the Ummah, and not confine itself to narrow, nation-based thinking espoused by conventional Macro-Economics. Starting from Adam Smith, the concern has been to increase the wealth of a nation, even at the expense of others. This is taken as a legitimate goal to pursue. Islam teaches us to think  at higher levels, and to think of the interests of humanity as a whole. My views, which are very much in conformity with those expressed by MNS, are detailed in Section 9 of my paper “Re-Defining Islamic Economics”, and therefore I will not repeat them here. One aspect not discussed there is worth highlighting. The Prophet Mohammad S.A.W. was so concerned about the guidance of all human beings that the Quran chides him to not kill himself with sorrow over their failure to accept the message. As his followers, we must have the same love and compassion for the entire human race. As an Ummah, we have been given the responsibility to convey the message to all mankind. Demonstrating viable models of economic justice and harmony is an extremely important part of this responsibility.

5: Against Debt and Gambling in Financial Markets
Section 4 of MNS deals with the issue of the topic. The potential of Islamic contribution is great, since it is nearly universally recognized that the use of these financial gimmicks, clearly contrary to Islamic teachings, were responsible for the financial crisis of 2007, which continues to affect world economy. Quite interestingly, the power of the financial moguls is so great that serious efforts at reform have been blocked, and the root causes of these problems remain unresolved. This leads to a serious possibility of a repeat and/or exacerbation of the financial crisis.Not only do Islamic financial principles have much to offer here, but there is recognition by the international community of the potential value of Islamic Economics in this area. I have treated this issue at somewhat greater length in my article on “On Islamic Economics”. More details are available from my three part article “Causes of the Global Financial”

6. Islamic Meso-Economics: Building Vibrant Communities
Section Five of the MNS paper highlights the importance of  The Third Sector: Communities.  I have made the same point in Section 8 of my paper on “Re-Defining Islamic Economics” which argues that we need to develop an Islamic Meso-economics dealing with the community level. The reason for the absence of such a field within conventional economics is their adherence to the principle of methodological individualism. Heterodox and Institutional Economics do realize the importance of communities. Historically, communities have played an extremely important role in providing social services in Islamic societies. Section 8.4 of my paper “Islam Versus Economics” highlights the importance of communities and the many different ways that they can solve economic problems not envisioned in conventional economic theory.
To re-iterate, I am in complete agreement with MNS on the importance of the third sector, and have expressed these views at length in other writings. It is of great importance to understand that social reform is to be carried out by communities rather than by trying to grab power and impose it from the governmental level. This is the way to build consensus rather than to autocratically impose change.
7. Economic History of Muslims & Muslim Institutional Structures
This is the topic of section 6 of the MNS paper. Again, I am in perfect agreement here. The central institutional structures of an Islamic Society are radically different from those a capitalist society. This point has been discussed in detail in section 8: Institutions of an Islamic Society, of my paper “Islam Versus Economics”. We can learn a lot from our history and our historical institutions. These are radically different from conventional capitalist ones. The idea of making minor modifications to conventional capitalist institutional structures will not lead us to an economy  which is Islamic in spirit. The institutional structure captures the spirit of capitalism which is the accumulation of wealth, based on competition and selfishness. MNS calls for institutional structures based on Zakah, Awqaf and Hajj; these capture generosity, sacrifice, and cooperation which are the spirit of Islam.
Again, I find myself in complete agreement with MNS on these issues.
8. Replacing Market Models by Family
In Section Eight (probably should be Seven) of his paper, MNS discusses  Alternative Models: From Market to Family. It is important to place this in the context of “The Great Transformation” which took place in Europe, as described by Karl Polanyi in his book of this name. This was the transition from traditional society to the market society. The disastrous effects of placing everything in the marketplace have been documented in many books; as just one example out of many, see The Costs of Living by Barry Schwartz. The idea that human lives can be valued in dollars led to the grimly inhumane assessment by Madeleine Allbright, US Ambassador to the UN, made on public TV, that the deaths of half a million Iraqi children due to US Embargo was a fair price to pay for achievement of US political goals in the Middle East.

In my papers entitled “The Limits to Market Economy,” and “The Rise and Fall of the Market Economy,” I have spelled out in great detail the causes and effects of the transition from traditional society to the market society in which we currently find ourselves. I am in complete agreement with MNS on the need to reverse this change.

9: Conclusions
I find a remarkable harmony in views on MNS and myself on what needs to be done. This is remarkable because the points of views detailed are quite far from mainstream views among both traditional economists and Islamic economists. While harmony in consensus and dominant views is common, there is a vast amount of disagreement among heterodox economists and Islamic economists on the diagnosis of the problem, and correspondingly on the solution. This disagreement is reflected in the differing definitions offered for economics, which are more than twenty by my count.
Although the articulations and shades of emphasis are different, MNS and Iare in complete agreement as to the main issues currently facing us and how to go about resolving them. This is a good omen, since solutions to problems facing the Ummah as whole necessarily require consensus. The hand of Allah is with the Jama’a. If we can build consensus on the path to pursue, we can attract the help of Allah, without which no change or improvement in our conditions is possible.

Saima Mahmood “Efficiency Wages and Non-monetary Motivational Strategies: An Experimental Approach” Ph.D. Thesis, PIDE, Islamabad, Pakistan 2011. Download from:
US President Eisenhowers Speech on the Military Industrial Complex
Asad Zaman, “The Limits of Market Economy,” entry in Encyclopedia of Islamic Economics,to appear in 2013. Download from:<>
Asad Zaman, “The Rise and Fall of Market Economies,” Review of Islamic Economics, 2010, Vol. 14, No. 2. Download from:

Asad Zaman, “Logical Positivist Methodology and Islamic Economics,” ;  paper prepared for 2nd International Conference on Islamic Economics and Economies of Muslim CountriesatEcon Dept, KENMS, IIUM, Kuala Lumpur, Malaysia is organizing during 29-30 January 2013. Download from:
Asad Zaman, “Re-Defining Islamic Economics” paper prepared for conference on “Islamic Economics at Crossroads” at Islamic Economics Research Center, King Abdul-Aziz University, Jeddah, on November 12-13, 2012. Downloadable from:
Asad Zaman, “Contrasts between Islamic and Economic Views of Incentives,” paper submitted to IRTI e-journal, Islamic Economic Studies. Download from:
Asad Zaman, “Principles of An Islamic Education,” Lecture 1 of a textbook on Islamic Economics under preparation. Download from:
Asad Zaman: “On Islamic Economics,” Newspaper article published in Express Tribune on June 10, 2010: 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: “Causes of the Global Financial Crisis” published in three parts in the Express Tribune on April 15, April 30, and May 23 of 2011. Download from:
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