Resource Scarcity : Islamic Economics

The Qur’an informs us that God has stocked the Earth (and heavens) with his inexhaustible treasures to provide sustenance for all His creatures. But to draw from this, as Akram and others do, the inference that scarcity becomes non-existent for economics, secular or Islamic, is rather eristic, to put it mildly. The catch is in the failure to realize that the fact of existence of ample resources for human beings and others at all points in time and space is one thing, while their availability to individuals or groups at a given hour and location is quite another. It is not the existence per se, but the state of their availability that lends meaning to the idea of scarcity as a cornerstone stone of economics. The availability of resources is an increasing function of knowledge – knowledge of their existence, of the ways to extract or obtain them, of their uses and of their costs. The history of the march of human civilization is the history of human conquest of nature. It is the history, in essence, of pushing outward relentlessly the frontiers of scarcity through unceasing inventions and innovations in science, technology, and societal management.

 Scarcity, as explained above, is a part of divine scheme to spur humanity into action and to test people thereby; for the Qur’an not only talks of God’s bountiful resources but also informs us that He alone is the source of knowledge and that He gives it to those who seek only bit by bit, lest they become proud and arrogant. The proposition that scarcity of resources is just a human made phenomenon must be taken with a grain of salt. To regard scarcity as a mere disturbance factor in the ‘natural state of adequacy ….is neither correct nor necessary….Thus, resources remain limited because of the inadequacy of human knowledge despite God’s benevolence. Presumably, one can visualize Islamic economics as a study of human behavior concerning the use of scarce resources for satisfying multifarious wants in such a way as would maximize falah.

Hasan (1996) quoted in “Methodology of Economics – Secular vs Islamic” by Waleed J Addas

Shariah Compliance or Maqasid-as-Shariah

The functions of maqasid as-shari’ah and shari’ah-compliance are not identical. The maqasid as-shari’ah is necessarily and sufficiently in agreement with the idea of shari’ah-compliance; but ‘‘shari’ah-compliance’’ as practiced today may not necessarily invoke maqasid as-shari’ah. It has been pointed out loosely that the maqasid as-shari’ah includes the goals of sustaining Islamic belief, self which comprehends progeny, needs which includes property and security, and intellect which includes knowledge, and sustainability of the Islamic community (Shatibi, 1884). There is a close correspondence between Shatibi’s delineation of the maqasid as-shari’ah and those explained by Imam Fakhruddin Razi and Imam Ghazali. This topic was covered earlier while discussing the concept of moral self-actualization in Islam. The comprehensive way of delineating moral development of society in terms of the shari’ah-compliant basket of essentials comprises necessaries (durruriyath), comforts (hajiyyath), and refinements (tahsaniyyath) of Shatibi. Likewise, according to Imam Fakhruddin Razi the moral development regime comprises ubudiyyah (life-sustaining by means of worship). To Imam Ghazali it meant sustaining knowledge and the world system in the light of inner surrender to the conscious oneness. Shah Waliullah joined in the projects of explaining the Islamic worldview as a comprehensive multidisciplinary and multidimensional quest for an integrated approach to real experiences. This experience extended across economics, society, politics, philosophy, science, and belief (ibadah). He focused his project on the Qur’an and the Sunnah to explain the need for the multidimensional approach in the comprehensive development future of Muslims. But he went beyond to universalize the Qur’anic message by launching the translation of the Qur’an into other languages. In so doing, Shah Waliullah introduced a dialectical methodology to the study of worldly phenomenology in the light of Islamic epistemology.

The maqasid as-shari’ah was thus seen as the comprehensive understanding of the Islamic law in addressing the time-bound problems of human societies. Even science as human pursuit was not missed out in this comprehensive structure of socio-scientific development prescription for the Muslim world (ummah). We have seen in this regard, that dynamic basic needs of life were at the center of all development prescriptions of the great learned Qur’anic scholars, the mujtahids, for the rise of the conscious world-nation of Islam (ummah). In such a precept of the maqasid as-shari’ah only, it is possible to realize the essential impact of the Islamic law in life’s overarching and integrative functions. The shari’ah-compliance concept makes objective sense only in such an understanding and application of maqasid as-shari’ah.

The idea of ‘‘shari’ah-compliance’’ is not necessarily that of maqasid as-shari’ah. Most often it is found that shari’ah-compliance as an idea has fell victim to an overly legal-religious interpretation of the shari’ah to specifics taken separately from the overarching general system worldview of Islam. Besides, the tenets of Islamic law became increasingly surrendered to such piecemeal interpretations and applications. The result was a differentiated interpretation (fiqh) of the Islamic law by different Islamic schools. Some of these interpretations have lost legitimacy across changes of events and their complexity in time. Above all, in none of these piecemeal approaches to the shari’ah-compliance concept is the epistemic idea of unity of knowledge and the world-system, the participatory worldview of this conscious oneness and the human future, in place. These greatest precepts are merely expressed in utterance without delivering the functional ontological understanding of the being and becoming of a dynamic sustainable moral development future.

In Ibn Khaldun’s philosophy of history (Mahdi, 1964) we find his immaculate praise of the shari’ah as the ideal law. But at the same time one condescends to Ibn Khaldun’s utter failure in explaining the shari’ah as the comprehensive law of the great overarching system that the Qur’an builds for humankind. In the end, the shari’ah as a systemic worldview of divine code of life and the worldly pursuits did not flourish in the writings of Ibn Khaldun. Ibn Khaldun was devoid of the holistic and multidimensional intellection of history that is found in Shah Waliullah. In modern times, the reawakening of movements for the shari’ah is by and large a political and commercial one. No intellectual emphasis is placed, and Islamic scholars have failed to realize the great overarching meaning of the shari’ah as the systemic holism of human experience, extending beyond society into science as well. We have dwelled on this issue earlier. Here we can point out the futility of the idea of shari’ah compliance mistaken for maqasid as-shari’ah. This remiss has darkened the intellectual acumen on the Muslim frontage of Islamic economics and finance. This demise that continues to ferment the Islamic intellectual growth is once again the fiqhi-basis of interpretation and understanding of the shari’ah. The emphasis has been on the particulars of the shari’ah in respect of specifics, rather than in deriving the particular from the general system worldview of conscious oneness. This kind of intellection ought to be premised on the foundational episteme of Islamic law. Yet the possibility of such a pursuit has drifted to the backbench, with only a detached mention of the maqasid as-shari’ah, rather than the instilling of its functional ontology in the scheme of ‘‘everything.’’

Taqi Usmani’s book (2004) presents the prevalent nature of detachedness of the shari’ah-compliance concept from the Qur’anic holistic overarching worldview of maqasid as-shari’ah. One can note a number of disturbing historical developments and their present days’ consequences on the shari’ah implications in Islamic economics and finance. Firstly, the field of the shari’ah has been restricted to affairs of economics, finance, commerce, and society. The greater implications of the shari’ah in science and the socio-scientific world are nowhere even referred to. Consequently, the common understanding of the shari’ah is not ontologically and analytically grounded on the Tawhidi episteme of conscious oneness. A segmented understanding of the shari’ah is erected by such a dichotomy between Sunnat Allah, the divine law that is impelled to govern the physical universe; and the shari’ah that is made to govern worldly matters (muamalat). Reference to Tawhid as the cardinal axiom of Islamic law being detached, the functional ontology of the Tawhidi worldview in action in relation to the socio-scientific world-system, remains benign. The inner dialectical essence of integrated and complementary development sustainability across the overarching multidimensional domain of intellectual inquiry and positive action as conceived by the great mujtahids has no discernible trace in the prevalent meaning of the Islamic law. Upon this contorted knowledge of the shari’ah, the notion of shari’ah compliance takes its roots. The result is consequential methodological independence between differentiated compartments of the intellectual disciplines. Such a differentiated view has led to the annoyance of de-harmonization between the maqasid as-shari’ah and shari’ah-compliance concepts among differing schools of theology, namely of the pitiful mazhabs. Mazhab has become a means of both dividing Muslims and make the world bereft of intellection in the greatness of Tawhid as the episteme of the maqasid as-shari’ah to the entire world. In the case of legal rules governing the contract and financing of the principal Islamic financing instruments there remain wide differences and no substantial advance in intellection and application.

The greater goal of maqasid as-shari’ah in the light of sustainability in the ummah has failed. In this failed portfolio there is ambivalence toward dynamic life-sustaining regimes of development, poverty alleviation, global networking of Islamic markets and institutions, and a unified determination of structures of ummah transformation, relevant policies, institutions, instruments, and participatory development within an intellectual, and fresh and learning vision of change. But it harkens to the fact that the intellectual capital of Islamic transformation has remained low. Islamic institutions and buyer–seller relations have not included the ways of inducing the moral law in their institutional consciousness. The maqasid as-shari’ah has thus been abandoned in the face of the catchword of shari’ah-compliance. The fuqaha using traditional fiqh analogies have approved of such dissociated bundle of rules for gaining legitimacy. An Islamic transformation has thus failed to realize in essence. Yet such an Islamic conscious change is not in sight through the route of contemporary Islamic economic, financial, social, and socio-scientific thinking.

The overarching and systemic issues underlying the understanding and application of maqasid as-shari’ah invoke a general-system learning model based on the episteme of conscious oneness. The methodology of conscious oneness is conceptualized and applied to all issues and problems of Islamic economics, finance, science and society. This methodological approach has not been understood by the fuqaha and the modernist scholars in the field of Islamic issues of science and muamalat. Contrarily, the dissociated ways of understanding maqasid as-shari’ah by relegating it to traditional fiqhi rules on specific issues has rendered the entire Islamic intellectual enterprise to the whims of divided Islamic schools of thought led by their juristic heads (Imams). Yet the Imams did not pronounce this pursuit at all. It is the latter days fuqaha and Islamic scholars along with institutions such as Islamic banks, Islamic Development Bank, Organization of Islamic Conferences Fiqh Council and the like that have caused such a rift to happen and deepen. The so-called shari’ah- compliant financial instruments today lie in utter disarray.

The fuqaha and Islamic scholars of the latter days have forgotten the most important premise of Islamic intellection in developing maqasid as-shari’ah across overarching domains of ‘‘everything.’’ This area of investigation comprises the way that conceptualization and rules (functional ontology) can be derived and formalized on the basis of the epistemic origin of conscious oneness for the world-system taken up in perpetuity of learning processes in reference to the Tawhidi unity of knowledge. Tawhid has become a mere uttered word, sounded in the backdrop of Islamic intellection. It has not been understood and used as a substantive learning power.


Principle of Economic Efficiency : Islamic Economics

In the emphasis on the economic efficiency of the use of natural resources, either for consumption or production, we find Islam is differentiating clearly between two important notions: isràf and tabzìr. This has been mentioned in the Quranic verses with a particular distinction between the two.

In consumption for example, isràf could be interpreted as extending the level of consumption beyond the level of basic needs. This may lead to, and incorporates, the consumption of luxurious goods and services. In terms of the relationship between saving and spending, isràf may also be widened to include sacrificing future consumption, saving, for the sake of immediate consumption, and spending; which is a reflection of the consumer’s time preference in allocating his consumption between present and future income. In this case the balance between the two types of consumption, in both cases, first, the basic needs as compared with luxurious consumption, and second, future as compared to present consumption, which good Muslims are required to observe, may be impaired. This is not recommended; it is frowned upon and may even attract God’s dissatisfaction. But the punishment for this behaviour, is not, as it seems from reading the Quranic verses, as severe as the punishment associated with another level of consumption, tabzìr.

Tabzìr in an economic sense is the unnecessary use of economic resources, i.e. wastage of economic resources, large or small, and at all levels of consumption. Tabzìr, is not confined to the level of extravagance, but goes beyond that to include even the level of necessities if the consumer was wasteful in satisfying his or her very basic needs of these essential physio-sociological wants. To put it another way, one may have a variety of suits, meals, electrical appliances, and may in that reach the level of extravagance, which, to remind ourselves, is frowned upon and may even attract a penalty subject to the ability of economic resources and the development state of the economy, but one may not waste fabric or food ingredients
unnecessarily in having even one modest suit or eating one meal. Wastage, tabzìr, even in fulfilling most basic needs is forbidden. Therefore, while isràf is the extensive use of resources, tabzìr is the wasteful use of these resources; and there is a distinct line between the two. While the former may lead to further comfort, better appearance and, most likely, more pleasure in life, the latter leads to no purpose but wasting valuable resources to the community and the world by putting these resources to no use. The former may make one less of a perfect Muslim, but the latter would render a person irresponsible to the point of evil: a brother of Satan, “Verily resource wasters (mubazzirìn) are brethren to Satan, and Satan is the worst
unbeliever”, (Quran 17:27). Tabzìr attracts the wrath of God, for which the penalty is His retribution.

Excerpted from
Islamic Economics. A Short History (Themes in Islamic Studies) by Ahmed El-Ashker, Rodney Wilson

Market Structure in Islamic Economics

The examination of market regulations as laid down in the Quran and the Sunnah leads to an important conclusion: the Islamic market has the characteristics of a freely competitive market and that prices should be determined by the forces of supply and demand (Tuma, 1965). The Islamic market has, or should have, the following characteristics (Ibn-al-Ukhuwwah, 1939, Ibn-Taymiya, 1983):

1. The condemnation of monopoly: all forms of monopoly are condemned in the Sunnah. The Prophet is reported to have said, “Those who practice monopoly are wrong-doers” (Sahih Muslim), and in a stronger tone, “That who interferes in prices in order to increase them will be seated by God on a seat of fire on the Day of Judgment”, also, “That who hoards food for forty days is God’s enemy” (ibid). Hoarding food, or other commodities, is not always wrong, however, if hoarding is not for the purpose of controlling prices. Jurists have laid down conditions for monopoly, or hoarding, to be sinful (Al-Zuhaili, 1989):

a) The object hoarded is a surplus over what the person and his dependents need for a whole year, the person may hoard these needs for a maximum of one year.

b) The purpose of hoarding is to influence prices or with the intention of selling the object when prices increase.

c) The market shortage of the hoarded object.

d) It should be noted, therefore, that monopoly, or hoarding, per se is not regarded as a sin, rather, it is the purpose of hoarding and the consequences of monopoly that characterize a monopolist or a hoarder of being sinful or otherwise. For example, if monopoly appears as a result of one producer, or seller, becoming the only producer, or seller, of the product monopoly is not a sin providing that the producer does not use his monopolistic position to influence the market

2. Pricing: prices should be determined by market forces, demand and supply. The evidence of this rule is taken from the Sunnah where the Prophet is reported to have refused fixing prices, saying to the people who asked him to do so, “It is God who gives abundantly or sparingly, it is He who sets prices and I do not want to meet Him with someone’s complaint of me in body or wealth” (Abu-Yusuf). This is the general rule which, although accepted by all Muslim jurists, is conditioned by some. The Medieval jurist Ibn-Taymiya (1262–1328), for example, advocated that the Prophet’s saying was based on the conditions of the stability of the market, but if the market becomes unstable for reasons not related to fair dealing, the state has to step in to fix prices.

3. Information: the flow of information should be made available to both buyers and sellers. The Prophet is reported to have condemned meeting sellers outside the market place and finalizing deals with them before reaching the market (Sahih Muslim). This is to give the seller the opportunity to know the level of prices in the market place before finalizing a deal and the buyer the chance of buying goods at prices not influenced by the middle man. Also, when a deal between the seller and the buyer is struck, other buyers should refrain from offering a higher price to the seller in order to change the deal (Sahih Muslim). Before completing a deal, sellers and buyers are bound to follow the prices prevailing in the market.

4. The condemnation of future contracts if the quantity of the object is not known: this is because the seller is uncertain of his ability to honour the contract. It is the ambiguity surrounding the quantity to be delivered that makes a future contract invalid. On the other hand, if the quantity is known, or could be agreed upon, future contracts may be allowed. For example, if a seller and a buyer completed a deal that the former would sell to the latter the total production of an activity during a future period at a certain time in the future (the crops of a field, the fish caught in a span of time, the output of a dive, the offspring of an animal or animals etc.) the deal is illegitimate (Al-Giziri, 1972). This is because the quantity of production that is subject to the contract is not known for certain. On the other hand if the subject of the contract was a determined quantity of future production (certain measures of crops, fish etc.) the contract is regarded as legitimate. Thus it is what is called “sale of the uncertain”, or “Buyu al-Gharar”, which was condemned by the Prophet (ibid.).

It might be interesting to note that the awareness of market forces and their effect on prices by caliphs has been demonstrated more than once in Islamic history. During Caliph Umar’s reign (634–644), as a result of a short of supply in al-Medinah in around 639 A.C. the prices increased substantially. The second caliph did not try to fix the prices but instead instructed his viceroy in Egypt to send him supplies to bring the prices down, which he did (Tuma, 1965).

Another example can be learned from the time when the caliph al-Mansur was selecting a site for his new city, Baghdad, in 767 A.C. Al-Mansur is reported to have said that he wanted a site where people could earn a living, where prices could not be high or supplies scarce, because if he resides where supplies could not be reached by land or sea there would be scarcity, high prices and hardship for the people (ibid.). This awareness of the Heads of State of the role of market forces reflect an early recognition of the role of demand and supply in determining prices with no need for state intervention.

Even when the state intervenes in particular circumstances when the market is in a state of abnormality, a condition that requires intervention as Imam ibn Taymiya advocated, such intervention is not in negation of the recognition of the market forces. These forms of intervention, as Tuma suggests, are not in conflict with the competitive market structure or with competitive prices (ibid.) as long as they aim at stabilizing prices. But, when the market is stable, prices are determined in accordance with competitive market forces.

Excerpted from
Islamic Economics. A Short History (Themes in Islamic Studies) by Ahmed El-Ashker, Rodney Wilson