6th International Islam and Liberty Conference

Building Islamic Foundations for Open Markets

Ali Salman

Islam & Liberty Network organized its 6th international conference “Building an Islamic Case for Open Markets” in Islamabad with the support from the Iqbal Institute for Research & Dialogue (IRD) Islamabad. This article is based on the papers presented in this conference. This article introduces some of the fundamental ideas presented in this conference but should not be substituted for the full papers (which are now available on our website) or a formal proceedings, which will be published soon.

As the Swedish intellectual Nima Sanandaji argues in his book “The Birth of Capitalism: The Middle East” private enterprise, market economy and ideological support for free exchange are often assumed to have a Western origin. The true root of these practices and ideals are however found in the pre-Islamic and Islamic Middle East. Market practices, economic theories and even industrialization in Europe evolved not independently but as a continuation of the Middle Eastern market tradition. Nima presented the crux of his book through a video-recorded message for the conference.

In his paper, Ali Hassania from Iran argued that “Manṭiqat al-Firāq”, a Shiite economic theory, points to an area in religion without any legal and religious source. This theory was firstly presented by Allamah Sayed Muhammad Baqir Ṣadr (d. 1981) in his book “Our Economy” (Iqtiṣādunā). According to the theory, religion has allowed the Islamic ruler to lay down rules and regulations in certain social matters, especially in economy, taking into account the rules and according to the needs of time.

Afzal Parvez from UK argued that with the case of open markets comes five main areas to consider when judging the Islamic legality of open markets. These are: (a) the notion of profit and wealth creation, allowing for (b) free trade, which then brings about the implication of the (c) concept of welfare and (d) consumer protection, whilst regulating the (e) size and role of government in Islam. These five areas consecutively go hand in hand when a system of open markets dominates the way nations and people trade.

Noor Fatima from Pakistan, argued that in the light of the history of development of capitalism an Islamic provision and its economic productivity, we believe that it is fair to conclude that Islam has not been a obstacle in the system of market economy in Muslim states. She argued that Islam as religion and culture dimension interacts with the formal institutions of the state and in this case the property rights institutions. Private property rights are sacred in Islam. There is no restriction, except some ethical regulations of free market economy and property rights in Islam. The interest is forbidden and risk sharing is encouraged in Islam to promote the welfare for other individual.

What does Islamic tradition offer for social protection? As explained by Bangladesh’s academic Md. Thowhidul Islam, Waqf is “the permanent endowment by a Muslim of any of his property for a purpose recognized by the Muslim Law as religious, pious or charitable.” It is a permanent arrangement, which becomes immediately effective, and cannot be kept in abeyance; and it can never be confiscated. From its inception, Waqf has been an integral part of the development of Muslim society. Thowdilul Islam shared that during the peak of the Islamic civilization, the waqf land occupied anywhere from one-third to three-fourth of the land mass.

Mustapha Radji from Algeria presented an interesting comparison between Sufi and Salafi Muslim groups while analysing their approaches to free markets based on a survey in Algeria. The results are controlled for age, education and social status. While Sufi Muslims tend to have more acceptance for open and competitive markets, Salafi Muslims offer greater resistance to the taxation powers of the government.

In her co-authored paper, Pakistan’s Hina Haq, presented an Islamic perspective on the emerging cryptocurrency and concluded that it is in harmony with the Islamic consideration of governance, regulation and market compliance.

Islamic Economics is a part of the greater movement of Islamization of knowledge. Representing this view, Asad Zaman argued that we need to completely reject Western theory of knowledge and the economic paradigm which has emerged as a result of Western hegemony. Humaira Shahid argued that the economic model of Madinah was not a finance-backed economy, but rather a trade-backed economy. Shaykh Umar Vadillo, presented the case of Islamic Gold Dinar and presented it as the solution of monetary crisis.

The cross-country comparison by Finland’s academic Jani Kinnunen took a hybrid approach to the relation of economic freedoms and GDP by firstly finding out separate similar clusters of countries, then using principal component analysis to reveal the most important factors explaining the variance of the large set of variables and taking a short look at correlations of qualititave factors such as state’s view on religion, while transforming also freedom variables to qualitative classes to find out which variable classes are related and could explain the other variables.

Fatiha Talahite from France argued that on the base of the Maghrib countries, the adaptation of property rights for more justice and equity to women in the Muslim world, is blocked by an institutional framework inherited from colonization, split between “conventional” rights and personal status. In this dichotomous framework, while the conception of the property right falls under the civil code and reproduces the Western model, the gendered property rights, especially in inheritance, are fixed by a personal status code which appears archaic and outdated. To reconcile these two opposite parts of the law, some claim the generalization of Shari’a to the entire body of law, while others, on the contrary, advocate “modernizing” the personal status code, separating it from religion. Fatiha proposes to open a reflection on the property right itself, relying both on contemporary criticisms of conventional model – in particular, the Theory of Commons – and on the ethical approach to Islamic Economics and Finance challenging the neutrality and universality of Western economic thought.

Hafas Furqani from Indonesia spoke on the issue of distribution in economics. There is a concern among scholars on how justice can be achieved in distribution. Various theories have been proposed to answer that problem, such as strict egalitarianism, the difference principles of John Rawls, resources-based principles, welfare-based principles ala utilitarianism, desert-based principles, and libertarian principles. The theories differ in the object of distribution, goals of distribution and the basis of a just distribution. According to Hafas, the Qur’an has outlined several guiding principles on distribution such as the principle of kasb (whereby individuals must put their effort to attain his livelihood and the effort is the basis for a just reward), rizq (Allah has allocated provision to individuals upon His discretion and hence inequality will exist in society as part of test in human life), amānah (all wealth essentially belongs to Allah SWT and individuals hold it as a trust which requires responsibility and accountability), huquq (there are rights of others in personal wealth that should be delivered obligatorily and voluntarily), infāq (spending wealth in the way of Allah, fi sabilillah, which also means spending for personal and social wellbeing is the only options in Islamic concept of distribution), and ‘adalah (establishing justice in distribution at personal and social level is the aim of Islamic distribution). These principles set the foundations for distributive justice framework and direction of Islamic distribution scheme towards an establishment of a just and equitable society.

Muhammad Iksan, also from Indonesia, presented his paper on the public opinions based on surveys conducted in Indonesia and Malaysia. Two surveys revealed public opinion could be a starting point to understand public support for market friendly reform and market mainstreaming. From two surveys, there is a need to continue popularizing the idea of economic liberalism – in this case is free trade, economic openness and economic freedom in general sense- by choosing partners along the way. It is important to know more on taxonomy of political attitude toward free market reform – the Indonesian case informed us- technocrats, politicians, bureaucracy, media, civil society organizations and academia.

Majdi Al Mustapha presented a case study of his country, Lebanon tracing important developments since the 19th century. Lebanon has had a great benefit from having a laissez faire economy throughout history. As can be seen throughout its history, the greater the amount of economic freedom and less intervention, the greater it was able to prosper and create wealth for all citizens.

Raza Naeem from Pakistan presented a historical study on the historical figure of Sindh Sufi Shah Inayat (d. 1718) who lodged a struggle to bring collective farming as a socialist mode of production and mode of distribution in the era of feudalism. Raza considered Shah Inayat as a visionary having pre empted socialism whose experiment failed.

Saba Kausar, in her paper compared the financial performance of Islamic and conventional stock prices in Pakistan’s equity market using Karachi Meezan Index as a proxy of Islamic index and the Karachi Stock Exchange Index is selected as a proxy of conventional index.

Admir Cavalic from Bosnia spoke about an Islamic understanding of Corporate Social Responsibility. His paper argues that CSR is not contrary to liberal principles, since by maintaining relationships with stakeholders and the use of CSR, the company achieves a certain competitive advantage, which ultimately leads to profit. Also, according to Admir, CSR is not contrary to Islam. Islamic companies have a legally and socially binding obligation to act in accordance with certain ethical principles.

In my comments, I presented this view that in its heydays, the Muslim civilization was a hotbed of open trade, private property and prosperous society. It was set up on the principles of economic organization as defined by the Prophet Muhammad, who proscribed price control, guaranteed trade freedom, sanctioned low taxes, secured private property, and encouraged voluntary welfare spending. However, the discipline of Islamic Economics, which was founded in the 20th century took the opposite direction. Largely developed by the clerics resisting imperialism- and its attendant institutions such as capitalism- Islamic Economics leans heavily towards a big state, central planning, state welfarism and price controls under the rubric of social justice. Prominent Islamic economists are largely critical of free market capitalism, which they define rather narrowly as usury-based savings and investment cycle. There is therefore need to take a fresh look at the original intent of Islamic economic teachings.

By organizing this conference, I hope that we have advanced the debate on Islam and Economics by talking about theoretical and institutional issues rather than the conventional debate on Islamic banking and finance. I am also of the view that hosting of the conference in a conservative setting itself is a proof of openness which is critical for a healthy academic environment. This is why the credit goes to the leadership of IRD and the International Islamic University Islamabad for organizing a lively debate, which was led by 18 speakers from 12 countries and witnessed by more than 400 participants for two full days.

Author is CEO of Islam and Liberty Network, a foundation based in Malaysia with the mission to develop and promote a Muslim case of freedom.

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