Author: Dr. Ali Salman*
In his keynote royal address to the 7th World Conference on Islamic Thought and Civilization, His Royal Highness Sultan Nazrin Shah, Sultan of Perak, Malaysia, spoke at length about current challenges faced by the Muslim majority countries. His scholarly and passionate speech was marked with deep reflections supported by well-researched economic data on human development and conflicts in these countries. His key insight: Although Muslim majority countries have shown improvement in human development since 2014, most of them remained marred with poverty and conflict. Sultan Nazrin further noted that even Muslims living in the developed countries remain relatively backward in terms of education and wealth. At the end of the “Sultan’s Speech”, I asked myself: are poverty and conflict Muslim phenomena?
In my presentation, I started with the same question. First, I found my own answers, endorsing Sultan Nazrin’s findings. When I checked the average purchasing power of 54 OIC countries in 2022-23, as per the World Development Indicators, it came out to be $18,669. When I checked the similar figure for the average of 37 countries in OECD, it was $58,955. Though the OIC and OECD are not quite comparable in terms of composition of membership, the gap was revealing.
What causes poverty and conflict? Let’s turn this into a positive question and ask: how do we achieve peace and prosperity?
I argue on institutional lines. Economic Freedom Index published by the Fraser Institute provides a possible answer. There are five institutions which define economic freedom. First is the Size of Government. As government spending, taxation, and the size of government-controlled enterprises increase, government decision-making takes the place of individual choice and economic freedom is reduced. More government means less economic freedom. Second area is Legal System and Property Rights—Protection of persons and their rightfully acquired property is a central element of both economic freedom and civil society. Third area: Sound Money—Inflation erodes the value of rightfully earned wages and savings. Sound money is thus essential to protect property rights. Forth Area: Freedom to Trade Internationally—Freedom to exchange—in its broadest sense, buying, selling, making contracts, and so on—is the essence of economic freedom. Fifth Area: Regulation—Governments not only use a number of tools to limit the right to exchange internationally, they may also impose onerous regulations, domestically as well as on international trade.
Look at the following table based on the Economic Freedom Index 2023:
| OECD | OIC | |
| Economic Freedom of the World 2023 (Ranking, out of 161 countries) | 26 (Average of 37 countries) | 82 (Average of 53 countries) |
| Index of Economic Freedom | Mostly Free | Mostly Unfree |
| Doing Business Index 2019 (Ranking, out of 190 countries) | 33 (Average of 37 countries) | 115 (Average of 53 countries) |
The average rank of OIC is 82 out of 161 countries and it considered “mostly unfree”. The average rank of OECD is 26 and it is considered “mostly free.” It is also easy to see relative position of these countries on “Ease of Doing Business” while noting that the World Bank suspending the publication in 2020.
It seems that we will be better off by embracing free markets and economic freedom to overcome poverty. However, there is a strong resistance in Islamic scholars to this idea. Even liberal and progressives amongst Muslim who accept liberal democracy, criticize free market and reject it as a “Western” product. In fact, this view is also shared by many others in the “South”, who advocate for South-South relationships.
As I remarked during my panel, Islam does not oppose free market capitalism. As historical and empirical work of Benedikt Koehler in his book “Early Islam and the Birth of Capitalism” (2016), shows, Islam played a role in the evolution of free market capitalism!
I take this view forward and explain it my book Islam and Economics: A Primer on Markets, Morality and Justice (2021). I argued that the “Classical Islamic Economic Framework”, which emerged in 7th century Arabia in Medina under direct guidance of Prophet Muhammad (SAW), had strong elements consistent with free markets. In. I present the following as defining elements of this framework: price freedom, free trade, strong business regulations, low rate and flat taxes, sound money and welfare through societal means. Furthermore, I argue that we can trace historical foundations of this system without necessarily relying on subjective interpretation of religious text. I take a critical view of the of modern “Islamic Economics” that seems to support central planning and socialistic economy.
I agree with Sultan’s diagnosis of disproportionate presence of poverty and conflict in Muslim societies and communities, but not necessarily with his solution. To overcome this poverty and conflict, we need better governance and economic freedom, and not just charity and philanthropy. As the successful journey of Malaysia to overcome poverty and achieve prosperity demonstrates, people need peaceful conditions, good government and economic liberties to find better opportunities. Muslim societies are no exception to this.
*Author is CEO of Islam & Liberty Network (L) Foundation. This article is based on the author’s presentation at the 7th World Conference on Islamic Thought and Civilization held on 29-31 July in Ipoh, Malaysia.
