Islam, Economics, and Society

Downloaded by [University of Defence] at 20:55 09 May 2016 ROUTLEDGE LIBRARY EDITIONS: POLITICS OF ISLAM ISLAM, ECONOMICS, AND SOCIETY Downloaded by [University of Defence] at 20:55 09 May 2016 This page intentionally left blank Downloaded by [University of Defence] at 20:55 09 May 2016 ISLAM, ECONOMICS, AND SOCIETY SYED NAWAB HAIDER NAQVI Volume 5 Downloaded by [University of Defence] at 20:55 09 May 2016 First published in 1994 This edition first published in 2013 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN Simultaneously published in the USA and Canada by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 1994 Syed Nawab Haider Naqvi All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN: 978-0-415-64437-2 (Set) eISBN: 978-0-203-07906-5 (Set) ISBN: 978-0-415-83079-9 (Volume 5) eISBN: 978-0-203-38137-3 (Volume 5) Publisher’s Note The publisher has gone to great lengths to ensure the quality of this reprint but points out that some imperfections in the original copies may be apparent. Disclaimer The publisher has made every effort to trace copyright holders and would welcome correspondence from those they have been unable to trace. Downloaded by [University of Defence] at 20:55 09 May 2016 < Cl ISLAM, ECONOMICS, ANDZ SOCIETY Downloaded by [University of Defence] at 20:55 09 May 2016 This page intentionally left blank Downloaded by [University of Defence] at 20:55 09 May 2016 ISLAM, ECONOMICS, AND SOCIETY Syed Nawab Haider Naqvi Downloaded by [University of Defence] at 20:55 09 May 2016 KEGAN PAUL INTERNATIONAL London and New York First published in 1994 by Kegan Paul International Ltd UK: P.O. Box 256, London WClS 3SW, England USA: 29 West 35th Street, New York, NY 10001-2299, USA Distributed by John Wiley & Sons Ltd Southern Cross Trading Estate 1 Oldlands Way, Bognor Regis West Sussex P022 9SA, England Routledge, Inc 29 West 35th Street New York, NY 10001-2299, USA © Syed Nawab Haider Naqvi, 1994 Phototypeset in Palatino 10 on 12 pt by Intype, London Printed in Great Britain by TI Press Ltd, Padstow, Cornwall All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanicalor other means, now known or hereafter invented, inc1uding photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data Naqvi, Syed Nawab Haider Islam, Economics, and Society I. TItle 297.19785 ISBN 0-7103-0470-6 Library of Congress Cataloging-in-Publication Data Naqvi, Syed Nawab Haider. Islam, economies, and society I Syed Nawab Haider Naqvi. 18Opp. 22cm. Inc1udes bibliographical references (p.l64) and index. Downloaded by [University of Defence] at 20:55 09 May 2016 ISBN 0-7103-0470-6 1. Economics-Religious aspects-Islam. 2. Islam- Economic aspects. I. TItle. BP173.75.N3734 1993 330. 1-dc20 93-2443 CIP Dedicated to my wife Saeeda and our daughters Andalib, Tehmina, Qurratulain and Neelofar Downloaded by [University of Defence] at 20:55 09 May 2016 Downloaded by [University of Defence] at 20:55 09 May 2016 IN THE NAME OF ALLAH, THE MERCIFUL, THE MERCY-GIVING CONTENTS Foreword by Professor Khurshid Ahmad xi Preface xvü Chapter 1 Introduction 1 Plan of Work 5 PART I: FOUNDATIONAL ISSUES Chapter 2 The Nature and Significance of Islamic Economics 13 A Matter of Definition 13 Ethics and Eeonomics 15 The Belief in the Divine Presenee 15 Muslim Society versus the Islamie Society 16 On Assessing Islamie Eeonomics 17 Does Islamic Economies Exist? 18 Summary 20 Chapter 3 The Ethical Foundations 24 An Outline of Islamie Ethies 24 The Ethieal Axioms 26 Downloaded by [University of Defence] at 20:55 09 May 2016 Unity (Tawhid) 26 Equilibrium (Al Adl wal Ihsan) 27 Free Will (Ikhtiy'ar) 29 Responsibility (Fardh) 31 Summary 34 vü CONTENTS PART 11: A MODEL OF ISLAMIC ETHICAL AXIOMS Chapter 4 The Framing ofAxioms of Islamic Ethics 41 Religion as a Source of Ethical Axioms 41 The Characteristics of the System of Ethical Axioms 42 The 'Effidency' of the Islamic Ethical Axiom System 44 Towards a Normative Islamic Economics 47 Summary 50 Chapter 5 The Rules of Economic Behaviour in an Islamic Economy 53 From Axioms to Rules of Economic Behaviour 53 Rational Behaviour and Ethical Environment 55 Ethics and Rational Behaviour 55 The 'Priority' of Individual Liberty 56 Ethics and Consumer Behaviour 57 Pareto-Optimality as a Sodal-Choice Rule? 60 Ethics and Distributive Justice 61 Reducing Income Inequality 62 Structural Change 62 Ethics and the Role of the Government 64 The Problem of Sodal Choice in an Islamic Economy 66 Summary 67 Chapter 6 A Perspective on Inter-Systemic Comparisons 71 Islam and Sodalism 72 Islam and Capitalism 75 Islam and the Welfare-State Doctrine 79 Summary 80 Downloaded by [University of Defence] at 20:55 09 May 2016 PART 111: THE OBJECTIVES AND POLICIES IN AN ISLAMIC ECONOMY Chapter 7 Setting the Poliey Objectives 87 The Basic Objectives 88 Individual Freedom 88 Distributive Justice 89 Universal Education 91 Economic Growth 92 viii CONTENTS Maximizing Employment Generation 94 Surnrnary 95 Chapter 8 A Taxonomy of Policy Instruments 99 Some Key Policy 1ssues 100 The Institution of Private Property 100 Growth-Promoting Policies 103 Social Security System 104 The Question of Public Ownership 105 Surnrnary 107 Chapter 9 The Problem of Abolishing Interest: I 110 A Few Clarifications 111 An 1slamic Perspective on Interest 113 The Problem of Positive Tune Preference 114 The Marginal Utility (Disutility) of Consumption (Savings) Over Time 115 The Depreciation of Capital and New Investment 115 Introducing Money 116 Surnrnary 117 Chapter 10 The Problem of Abolishing Interest: 11 120 Can Interest be Abolished by Administrative Fiat? 120 PLS, Equities, and Bonds 121 The Fixed Rate of Return vs The Variable Rate of Return 122 From Interest Rates to Profit Shares 123 The Preference for the Variable-Return Instruments 123 1s Equity-Financing 'Separable' from Debt- Financing? 124 1s Uncertainty per se Desirable? 125 Downloaded by [University of Defence] at 20:55 09 May 2016 The Ethic of the PLS 125 Surnrnary 127 Chapter 11 Towards a Solution of the Problem of 1nterest 130 Regulating the PLS System 131 Indexing of the Rates of Return on Savings 132 The Principle of Indexation 132 Reforming Lending Operations 134 Surnrnary 135 ix CONTENTS PART IV: RAINBOW'S END Chapter 12 From the Ideal to the 'Reality' 139 The Challenge of Transition 139 Financial Reforms in Pakistan 141 The Pangs of Transition 144 The 'Initial Conditions' 145 Private Property 146 Voluntary Combinations 147 Universal Education 148 Summary 149 Chapter 13 Towards a New Sodal Reality 153 A Leitmotif 154 The Mainsprings of Islamic Economic Philosophy 156 The Consequence-Sensitivity of the Islamic Economic Philosophy 158 Why an Islamic Economy? 159 The Force of Islamic Morality 160 The Road to Success 161 References 164 Index 172 Downloaded by [University of Defence] at 20:55 09 May 2016 x FOREWORD While the mainstream economie paradigm remains entrenched in the corridors of learning and research, the real-world situation is persuading an increasing number of economists and economic policy-makers seriously to doubt the 'universality', 'realism', 'productivity', and even 'morality' of some of the basic assump tions and core concepts of this paradigm. Thomas Ulen captures the mood of a sizeable number of the community of economists when he says: 'many of the most recent presidential addresses to the American Economic Association have been highly critical of received micro- and macro-economic theory. However, there has not yet been an offering of a new paradigm' (Thomas S. Ulen, Review of Nelson and Wmker's, An Evolutionary Theory of Economic Change in Business History Review, 1983, vol. 37, no. 4). Dissent and disagreement are no longer confined to the periph ery; they are making serious dents on the centre core. What is being re-examined does not relate merely to poliey perceptions and end-products; in fact the very assumptions about human nature, motivation, effort, and enterprise on which mainstream economics is based and the institutional framework in which Downloaded by [University of Defence] at 20:55 09 May 2016 the economic agent is expected to operate are placed under the spotlight. The current debate cannot be described as a search for new methodologies, formulations and prescriptions within the paradigm; it represents a serious effort to search for a new paradigm (Lester C. Thurrow, Dangerous Currents, Random House, New York, 1983; Amitai Etzioni, The Moral Dimension: Towards a New Economics, Macmillan, New York, 1988). This is a very challenging moment in the history of the evolu tion of economics. Peter Drucker surmises: 'Reality has out grown existing theories. This has happened twiee before. The xi FOREWORD first occasion was in the years of the "divide" of the 1870s. Then the neo-classidsts, Karl Menger in Austria, Stanley Jevons in England, and Leon Walras in France, created modem economics with their "marginal utility" theory.

Load more