The Economy of Islam

The Islamic religion is the second largest belief system in the world with approximately 1.25 billion followers, just behind Christianity with about 2 billion followers. There are an estimated 5.5 million Muslims in North America. Studies done into the popularity of religions have shown that the Christian population is falling while the Muslim population is rising. There is no specific explanation for this trend and it is of little significance at this point in time; however, in many years Islam may become the dominant world religion. The religion was founded by Muhammad somewhere between 610 and 632 AD in what is now Saudi Arabia.

I will briefly discuss the basic belief structure before getting into the economic impact of Islam. Islam literally means “surrender to the will of Allah.” Muslims consider Muhammad to be the last profit of God, in the line of other prophets, of which Jesus is included. Within a century after his death, the teachings of Muhammad and the Qur'an stretched from Spain to India. The “five pillars” of Islam, their primary duties, include prayer, to be preformed five times a day; almsgiving to the poor and the mosque (church); fasting during daylight for the month of Ramadan; and a pilgrimage to Mecca at least once in a lifetime and only if it is physically and financially possible. Formal sermons are held on Fridays, whereas Christianity is typically practiced on Sundays.

Islam has outlined a complete way of life for its followers. It has successfully influenced some governments to implement these practices not only on the social level but the economic level as well. Zakat, literally meaning “growth and purity” is a tax on Muslim capital owned beyond a certain minimum. According to the holy prophet of Islam, Zakat was to be taken from the rich for the benefit of the poor. Zakat is 2.5% of the value of possessions other than land, according to the Qur’an; the rate is determined “in what has been irrigated with rainwater, one tenth and in what has been watered with buckets or water wheels, one half of the one tenth” (Mishkat). The Zakat is different in that it is spent exclusively on the poor. It discourages the accumulation of wealth and ensures that it is being spent for a good cause. It has the main purpose of shrinking the gap between rich and poor.

Other types of taxes include the Ghanimah, which is wealth obtained during wartime, 20% of which was deposited to the public executor. Jizyah is a tax on non-Muslims for their lack of military service; military service is obligatory for all Muslims. This tax is levied because, even though non-Muslims are exempt from military service, they are still entitled to protection. Karaj is an annual tax paid by the countries conquered by Muslims.

The economy of Islam is based on socialist principles in an effort to increase equality and eliminate disparity. These principles have raised the standard of living and reduced the overall exploitation of the poor under Islamic governments. According to some Muslims, the unequal distribution of wealth is the root of all human conflicts. This is true to an extent since we have seen it in action over the course of the last 100 years in Eastern Europe. Socialist principles were developed in reaction to the growing exploitation of labor under capitalism. In an effort to turn this around, Islamic governments have levied higher taxes on the rich in order to help the poor and shrink the distribution gap.

The economic system under Islam is really a split between capitalism and communism. The system recognizes one’s right to build up private fortunes, but asks that those who do contribute at least 2.5% of their wealth for the benefit of the poor. These measures have attempted to eliminate the defects of both capitalism and communism; however, whether or not it has been actually eliminated remains to be pondered, since most writing on the benefits of an Islamic economic system suggest that it has successfully eradicated social despair and the downfalls of the two systems. It is abundantly clear by passages in the Qur’an that private fortunes are frowned upon:

“To those who hoard up gold and silver and spend them not in the way of Allah, tell them the tidings of grievous chastisement on the day when it [wealth] will be heated in the fire of hell, and their foreheads, their sides and their backs shall be branded with them. Moreover it will be said to them: ‘This is what you did hoard for yourselves; taste, therefore the fruits of what you hoarded there.”

On the other hand, those that spend their fortunes in the ways of God are entitled to divine blessings:
“The likeness of those who spend their wealth in the ways of Allah is similar to a grain which groweth seven ears and in each ear are a hundred grains. And Allah giveth manifold increase to those. He willeth, for Allah is all encompassing and all knowing. Those who spend their wealth in the cause of Allah, and afterwards make not reproach, their reward is with their Lord and they should not be afraid or aggrieved"

And thus, the system stresses that the individual has a responsibility to his or her community. Prosperity for the individual equates to prosperity for the community.

Inheritance laws exist to further restrict the accumulation of wealth. These laws insure equal distribution of inheritance among the family members with no restrictions based on gender. This breaks up property into family shares and prevents it from becoming the property of a group less than the size of the family.

These economic principles also control production and consumption of wealth. Although they recognize the right of an individual to gain wealth, it is profusely stated that wealth really belongs to Allah. Thus, wealth should be contributed to the common good and not hoarded for personal gain.

The concept of interest is forbidden under the Islamic economic system. Interest is seen as a major cause of business failure. It is also seen as the greatest evil to come from capitalism. The Qur’an mentioned interest as one of the seven harmful things Muslims need to avoid; “That which ye give in interest in order that it may increase other peoples’ wealth hath no increase with God.” Many modern economists have acknowledged the harmful effects of interest, causing commercial fluctuations in industrial crisis.

Commercial banks in an Islamic system have the same responsibilities as banks in a capitalist system, except they operate differently. Islamic banks are to share with their depositors the profit earned with their clients. Income is generated either by dealing with clients only for direct financing, or working as a trading bank or leasing bank and generating income in trading-finance or leasing-finance activities.

Turkey is a great example of a democratic Islamic state. Estimates conclude that its population is 99% Muslim. It has a secular constitution, education system and legal system. Turkey has proven to be a prime example of the compatibility of Muslim society with general western values and way of life. The system employed in Turkey is overwhelmingly supported by the Turkish people. The concepts fundamental to democracy (personal freedoms) are written in their constitution. Turkey represents a balance between social democracy and Islamic fundamentalism; religion is not allowed to rule the state and society. The Turkish people realize the importance of having an independent, non-religious state authority.

The word “secular” would otherwise be construed as being based on religion. This is not the case in Turkey. It really means taking religion and religious imperatives out of the public sphere and putting it where it belongs, private life. This secular democracy comes in contrast to systems in place in 54 Muslim countries. Ordinary Turks, women especially, appreciate the system because they know it brought the personal freedoms which come with democracy but not with a society ruled by religion.

Although Turkey is a shining example of how well an Islamic society can function under democratic principles, there are many Islamic states that base rule of law strictly on religious teachings with strict interpretation.

Only reference:

http://www.cipe.org/publications/fs/sanberk/sanberkspeech.htm

There should be something in this space.

But there isn't. Does this void bother you?

I like this block here on the side, it's very web 2.0.