Objectives of Islamic Economics by Waseem Dourehie

8/9/2019 Objectives of Islamic Economics by Waseem Dourehie

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Islamic Economics - 101

(Further Reading)

IAW 2009 - USYD


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Overview

Overview

1. General Economic Principles

2. Points for Consideration

3. Summary


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1. General Economic Principles

1. Gener al Econo m ic Principles

1.1 Mans vicegerency on earth

1.2 Abundance of natural resources

1.3 Basic economic problem

1.4 Economic Science v Economic System


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1. General Economic Principles MansVicegerency on Earth

It is He Who has created for you all things that are on earth ... [Al-

Baqarah 2:29]

But seek the abode of the Hereafter in that which Allah has given youand neglect not your portion of the worldly life ... [Al-Qasas 28:77]


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1. General Economic Principles Abundance of Natural Resources

If you count Allahs blessing, you will never number it ... [Ibrahim

14:34]

Verily, your Sustainer grants abundant sustenance, or gives it in scantmeasure, unto whomever He wills: verily, fully aware is He of [theneeds of His creatures, and sees them all. [Al-Isra 17:30]


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1. General Economic Principles Basic economicproblem is distribution, NOT production

1.3 Basic econom ic problem is d i s t r i bu t i on , NOTproduction


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1. General Economic Principles Economic Science v Economic System

Islam is concerned with the Economic System, not the EconomicScience

i) Economic Science = Production of Wealth

ii) Economic System = Acquisition and Distribution of Wealth


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And We sent down iron, in which is great might, as well as many

benefits for mankind ... [Al-Hadid 57:25]

Allah is He Who put at your disposal the sea so that the ships may sailby His command, and so you may seek His bounty ..." [Al-Jathiyah45:12]


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a. Allah (swt) informs us of:

1. Attributes of things

2. Benefit to mankind of these attributes

b. Allah (swt) does not inform us of:

1. How to extract these benefits

2. How to maximise these benefits

... in essence, the empirical sciences related to their utilisation


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c. So Islam does not interfere in the production of commodities.

Rather, Islamic explicitly informs us that empiricism is the domain

of man, e.g.:

i) Prophet (saw) in regards to manual pollination of date trees: Youare more aware of the issues of your daily life (amr dunyakum)

ii) Prophet (saw) sent two Sahabah to Jurash of Yemen to learnweapons manufacturing


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2. Points for Consideration Basis of Islamic Economic System

2.1 Basis of Islam ic Econo m ic System

a. Ownership

b. Disposal of Ownership

c. Distribution of wealth amongst the people


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2. Points for Consideration Ownership of Wealth (Acquiring Wealth)

2.2 Ow ner ship of w ealth (Acquiring W ealth)

a. Ownership is through the permission of Allah (swt) alone

b. Types of ownership - Private, Public & State


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2. Points for Consideration Means of Ownership (Private) - Work

c. Means of Ownership Private

i) Work (Body)

1) Cultivation of barren land

2) Extracting that which exists inside the earth

3) Hunting

4) Brokerage (Samsara) / Commission Agency (Dalala)

5) Partnership of Body & Capital (Mudharaba)

6) Sharecropping (Musaqat)

7) Working for others for a wage


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ii) Inheritance

1) Myriad rules relating to myriad circumstances

iii) Obtaining of property for sake of life (Obligatory)

1) Obligation of the State to look after its citizens

2) Obligation of the rich to give to the poor


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iv) State grants (Non-Obligatory)

1) Land grants (e.g. to Abu Bakr & Umar in Madinah)

2) Payment of debt3) War booties

4) Reconcile hearts


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v) Properties received without exchange or effort

1) Gifts

2) Blood money or wound money3) Dowry and other marriage gifts

4) Lost property


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2. Points for Consideration Disposal of Wealth - Investing / Spending

a. Difference between increasing property (science) and increasingownership of property (system)

b. Means of increasing wealth:

i) Agriculture (Land)

ii) Trading (exchange of things)

iii) Industry (transforming things from one form to another)


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2. Points for Consideration Disposal of Wealth - Agriculture

i) Difference between the neckof a land and itsbenefit


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ii) Classification of lands

Ushri land Land opened peacefully or whose inhabitants

embraced Islam

- e.g. Arabian peninsula (exception to the rule), Indonesia

Neck and benefit remain in the hands of its inhabitants

Ushr = 10% of actual production if naturally irrigated, or

5% of actual production if artificially irrigated


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ii) Classification of lands

Kharaji land Land opened through war

Neck belongs to Muslims, benefit to its inhabitants

Kharaj on land is similar to Jizya on the person.

Kharaj = not defined, but levied upon estimated production,and levied whether or not land is actually utilised


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2. Points for Consideration Disposal of Wealth Trading & Industry

i) Trading is a life necessity:

not all commodities are available in every location

cannot take something by force or through corruption


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ii) Trading systemises the means by which peoples / commoditiesinteract through mutual benefit

O you who believe! Squander not your wealth among yourselves invanity, except it may be a trade by mutual consent ... [An-Nisa

4:29]


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Tirmidhi reported that Abu Said narrated that the Messenger of Allah(saw) said:

The honest trustworthy merchant will be resurrected with theprophets, righteous and the martyrs.


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iii) Countless rules relating to countless facets of trade

... too many to list!


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2. Points for Consideration Disposal of Wealth Prohibited Means of Increasing Wealth

i) Gambling

O you who believe! Verily intoxicants and gambling and idols anddivining arrows are an abomination of Satan's handwork. Eschew

such abomination in order that you may prosper [Al-Maidah 5:90]


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ii) Interest / Usury

Those who devour (take) interest (riba) cannot stand except as theone whom the Satan, by (his) touch, drives him to madness. That isbecause they say: Trade is just like riba, whereas Allah permitted

trade and forbade riba. [Al-Baqarah 2:275]


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iii) Fraud / Deception

Narrated by Ibn Majah and Abu Dawud from Abu Hurairah, that TheProphet (saw) said:

No one of us is allowed to deceive

Narrated by Ahmad from Jabir ibn Abdullah, that The Prophet (saw)

said:

Any (human) flesh that grows from illegal (suht) property will notenter paradise, then the Hellfire deserves it more


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iv) Monopoly

Said ibn Al-Musayyab narrated from Muammar ibn Abdullah Al-Adawi in Bukhari that the Prophet (saw) said:

No one monopolises except the wrongdoer.

Al-Athram narrated from Abu Umamah, he said:

The Messenger of Allah (saw) forbade that a foodstuff bemonopolised.


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v) Price Fixing

Ahmad narrated from Anas who said:

Prices increased at the time of the Messenger of Allah (saw), so theysaid, O Messenger of Allah, we wish would you price (fix the

prices). He (saw) said: Indeed Allah is the Creator, the holder(Qabidh), the Open-handed (Basit), the Provider (Raziq), the

Pricer (who fixes prices); and I wish I will meet Allah and nobodydemands (complains) of me for unjust act I did against him,neither in blood or property.


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vi) Hoarding ... of gold and silver

And let those who hoard gold and silver and do not spend them in theway of Allah know that a severe and painful punishment is awaiting

them [At-Tauba 9: 34]

P i f C id i


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2. Points for Consideration Public Property

Public property are those :

i) which Allah (swt) stated as belonging to the community as awhole

ii) Allah (swt) prevented the individual from possessing any of themsingularly

P i f C id i


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These are categorised in three types:

1. That which is considered a public utility, so that a town or acommunity would disperse in search for it if it were not available(e.g., town rivers, dams, etc.)

2. The uncountable stores of minerals (e.g. oil, coal, etc.)

3. Things which, by their nature, would prevent the individual frompossession (main roads, thoroughfares, etc.)

P i f C id i


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The Prophet (saw) explained them in theAhadithby their descriptionrather than byenumerating them

P i t f C id ti


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Abu Dawud reported that Ibn Abbas narrated that the Prophet (saw)said:

Muslims are partners (associates) in three things: in water,pastures and fire

Ibn Majah narrated from Abu Hurairah (ra) that the Prophet (saw)said:

Three things are not prevented from (the people); the water, thepastures and the fire

P i t f C id ti


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At-Tirmidhi narrated from Abyadh ibn Hammal ...

that he came to the Prophet (saw) and asked him to grant him a saltladen land, and he granted it to him. And when he left, one person

in attendance with the Prophet (saw) said, Do you know what yougranted him? You granted him the uncountable water (Al-udd).

He (saw) then took it away from him.

P i t f C id ti


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2. Points for Consideration State Property

The State property is that property in which:

i) the Muslims masses have a right,

ii) its management is left to the Khalifah

P i t f C id ti


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2. Points for Consideration State Property

Examples include:

i) War Booties

ii) Kharajiii) Ushr

iv) Jizyah (head tax)

v) Rikaz (a fifth of hidden treasures)

2 P i t f C id ti


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2. Points for Consideration Bait ul-Maal (State Treasury)

a. Revenues of Bait ul-Maal

i) Booties (Fai) (Surrendered)

ii) Spoils (Ghanaim) (Through Fighting)iii) Kharaj (Land Tax)

iv) Ushr (Tithe)

v) Jizyah (Head Tax)

Cont ...

2 P i t f C id ti


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a. Revenues of Bait ul-Maal

vi) Rikaz (a fifth of hidden treasures)

vii) Public property revenuesviii) State property revenues

ix) Custom duties

x) Non-permanent taxes

xi) Zakat

2 P i t f C id ti


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b. Expenditures of Bait ul-Maal

i) Expenditures for which the treasury acts as custodian, i.e. Zakat

- Spent only upon the eight categories specified in the Quran

2 Points for Consideration


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ii) Expenditures due on the treasury by way of Iaalah, i.e.obligatory duties such as financial support (e.g., destitute, traveller)or Jihad

- Obligation, not subject to availability of funds

- State must raise funds if insufficient amount



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iii) Expenditures due on the treasury by way of Badal, i.e.recompense or allowance to people who rendered a service to theState

- E.g. state employees, soldiers, etc.

- Obligation, not subject to availability of funds

- State must raise funds if insufficient amount



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iv) Expenditures due on the treasury by way of Maslaha, i.e.public utilities

- Can be obligatory depending on need and urgency



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v) Expenditures due on the treasury by way of emergency, such asfamine or flood



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2. Points for Consideration Currency

i) Built upon the metallic standard

ii) Gold and/or silver

iii) Currency should be means of exchange, not tradable commodity

iv) Islam has linked gold and silver to a set of fixed rules

v) When Islam prohibited hoarding, it specifically prohibited thehoarding of gold and silver (i.e., the money supply)



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2. Points for Consideration Summary

Economic Science v

Economic System

Basic Economic

Question

Mans Vicegerency

DistributionOwnership Disposal

1. Agriculture

2. Trading3. Industry

Prohibited Means

of Disposal

Private Public State No

Riba

Bait ul

Maal

Currency

ExpendituresSources

Islam & Economics


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Economic System Part I

The End

Objectives of Islamic Economics by Waseem Dourehie

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