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Between the 9th and 14th centuries, theMuslim world developed many advanced economic concepts, techniques and usages. These ranged from areas of production, investment, finance, economic development, taxation, property use such asHawala: an early informal value transfer system, Islamic trusts, known aswaqf, systems ofcontract relied upon by merchants, a widely circulated common currency,cheques,promissory notes, early contracts, bills of exchange, and forms of commercial partnership such as mufawada.
Specific Islamic concepts involving money, property, taxation, charity and theFive Pillars include:
These concepts, like others inIslamic law andjurisprudence, came from the "prescriptions, anecdotes, examples, and words of the Prophet, all gathered together and systematized by commentators according to an inductive, casuistic method."[2] Sometimes other sources such asal-urf, (the custom), al-'aql (reason) or al-ijma (consensus of thejurists) were employed.[3] In addition, Islamic law has developed areas of law that correspond to secular laws ofcontracts andtorts.
Contemporary Islamic scholars draw heavily on classical opinions.[4] Modern Islamic economics emerged in the 1945s. As of 2004,Islamic Banks have been established in over eight countries, andinterest has been banned in three:Pakistan,Iran and theSudan.[5]
TheHawala, an earlyinformal value transfer system, has its origins in classicalIslamic law, and is mentioned in texts ofIslamic jurisprudence as early as the 8th century.Hawala itself later influenced the development of theagency incommon law and incivil laws such as theaval inFrench law and theCavallo in Italian law. The wordsaval andCavallo were themselves derived fromHawala. The transfer ofdebt, which was "not permissible underRoman law but became widely practiced in medieval Europe, especially incommercial transactions", was due to the large extent of the "trade conducted by the Italian cities with theMuslim world in the Middle Ages." The agency was also "aninstitution unknown to Roman law" as no "individual could conclude a binding contract on behalf of another as hisagent." In Roman law, the "contractor himself was considered the party to the contract and it took a second contract between the person who acted on behalf of a principal and the latter to transfer the rights and the obligations deriving from the contract to him." On the other hand, Islamic law and the later common law "had no difficulty in accepting agency as one of its institutions in the field of contracts and obligations in general."[6]
Thewaqf inIslamic law, which developed in themedieval Islamic world from the 7th to 9th centuries, bears a notable resemblance to the Englishtrust law.[7] Everywaqf was required to have awaqif (founder),mutawillis (trustee),qadi (judge) and beneficiaries.[8] Under both awaqf and a trust, "property is reserved, and itsusufruct appropriated, for the benefit of specific individuals, or for a generalcharitable purpose; the corpus becomesinalienable;estates for life in favor of successive beneficiaries can be created" and "without regard to the law ofinheritance or the rights of the heirs; and continuity is secured by the successive appointment of trustees ormutawillis."[9]
The only significant distinction between the Islamicwaqf and English trust was "the express or implied reversion of thewaqf to charitable purposes when its specific object has ceased to exist",[10] though this difference only applied to thewaqf ahli (Islamic family trust) rather than thewaqf khairi (devoted to a charitable purpose from its inception). Another difference was the English vesting of "legal estate" over the trust property in the trustee, though the "trustee was still bound to administer that property for the benefit of the beneficiaries." In this sense, the "role of the English trustee, therefore, does not differ significantly from that of the mutually."[11]
The trust law developed in England at the time of theCrusades (during the 12th and 13th centuries) was introduced by Crusaders who may have been influenced by thewaqf institutions they came across in the Middle East.[12][13]
After the Islamic waqf law andmadrasa foundations were firmly established by the 10th century, the number ofBimaristan hospitals multiplied throughout Islamic lands. In the 11th century, every Islamic city had at least several hospitals. The waqf trust institutions funded the hospitals for various expenses, including thewages of doctors,ophthalmologists, surgeons,chemists,pharmacists,domestics and all other staff, the purchase of foods anddrugs; hospital equipment such as beds, mattresses, bowls and perfumes; and repairs to buildings. The waqf trusts also funded medical schools, and their revenues covered various expenses such as their maintenance and the payment of teachers and students.[14]
The systems ofcontract relied upon by merchants was very effective. Merchants would buy and sell oncommission, with moneyloaned to them by wealthy investors, or a joint investment of several merchants, who were often Muslim, Christian and Jewish. Recently, a collection of documents was found in anEgyptiansynagogue shedding a very detailed and human light on the life of medieval Middle Eastern merchants. Businesspartnerships would be made for manycommercial ventures, and bonds ofkinship enabled tradenetworks to form over huge distances. During the ninth century banks enabled the drawing of check-in by a bank inBaghdad that could be cashed inMorocco.[15]
The concepts ofwelfare andpension[better source needed] were introduced in earlyIslamic law as forms ofZakat (charity), one of theFive Pillars of Islam, since the time of theAbbasidcaliphAl-Mansur in the 8th century. The taxes (includingZakat andJizya) collected in thetreasury of an Islamicgovernment was used to provide income for the needy, including the poor, elderly, orphans, widows, and the disabled. According to the Islamic juristAl-Ghazali (Algazel, 1058–1111), the government was also expected to store up food supplies in every region in case of a disaster or famine occurs. TheCaliphate was thus one of the earliestwelfare states, particularly theAbbasid Caliphate.[16]
In the medievalArab Agricultural Revolution, a social transformation took place as a result of changing landownership giving individuals of anygender,[17] the right to buy, sell,mortgage andinherit land.
Early forms of proto-capitalism andfree markets were present in theCaliphate.[18] An earlymarket economy and early form ofmerchant capitalism developed between the 8th and 12th centuries.[19] A vigorousmonetary economy developed based on the wide circulation of a common currency (thedinar) and the integration of previously independent monetary areas. Business techniques and forms ofbusiness organization employed during this time included early contracts,bills of exchange, long-distanceinternational trade, early forms ofpartnership (mufawada) such aslimited partnerships (mudaraba), and early forms of credit, debt, profit, loss,capital (al-mal),capital accumulation (nama al-mal),[20]circulating capital,capital expenditure, revenue,cheques,promissory notes,[21]trusts (waqf),savings accounts,transactional accounts, pawning, loaning,exchange rates, bankers,money changers,ledgers, deposits,assignments, thedouble-entry bookkeeping system,[22] andlawsuits.[23]Organizationalenterprises similar tocorporations independent from thestate also existed in the medieval Islamic world.[24][25] Many of these concepts were adopted and further advanced inmedieval Europe from the 13th century onwards.[20]
During theMuslim rule in India, realms such as theDelhi Sultanate,Bengal Sultanate,Mughal Empire,Nizam of Hyderabad and theKingdom of Mysore made significant contributions to the South Asian economy. In the 17th century Mughal India became the world's largest economy,[26][27][28] becoming the leading textile manufacturing power in the world, valued over 25% of worldGDP.
The concepts ofwelfare andpension were present in earlyIslamic law as forms of zakat one of theFive Pillars of Islam, since the time of theRashidun caliphUmar in the 7th century. Thetaxes (including zakat and jizya) collected in thetreasury (bayt al-mal) of anIslamic government were used to provide income for the needy, including the poor, the elderly, orphans, widows, and the disabled. According to the Islamic juristAl-Ghazali (Algazel, 1058–1111), the government was also expected to stockpile food supplies in every region in case of disaster or famine. The Caliphate was thus one of the earliestwelfare states.[16][29]
During the Islamic Golden Age, isolated regions had contact with a far-reaching Muslim trade network extending from the Atlantic Ocean and the Mediterranean in the west to theIndian Ocean andSouth China Sea in the east, and covering most of theOld World,[30] including significant areas of Asia and Africa and much of Europe, with their trade networks.[31] Arabic silverdirham coins were being circulated throughout theAfro-Eurasian landmass, as far assub-Saharan Africa in the south andnorthern Europe in the north, often in exchange for goods andslaves.[32]
This helped establish theRashidun,Umayyad, Abbasid,Ayyubid andFatimid Caliphates as the world's leading extensive economic powers in the 7th-13th centuries.[30]
Due to religious sanctions against debt,Tamil Muslims have historically beenmoney changers (not money lenders) throughout South and South East Asia.[33]
From the 8th century to the 13th century in Muslim lands many crops and plants were planted along Muslim trade routes, farming techniques spread. In addition to changes in economy, population distribution, vegetation cover,[34] agricultural production, population levels,urban growth, the distribution of the labor force, and numerous other aspects of life in the Islamic world were affected according to Andrew Watson.[35] However this is disputed by other scholars, who claim cultivation and consumption of staples such asdurum wheat, Asiatic rice, andsorghum, as well as cotton, were already commonplace centuries before,[36] or that agricultural production declined in areas brought under Muslim rule in the Middle Ages.[37]
The early Abbasid Caliphate also had the highest literacy rates among pre-modern societies, alongside the city ofclassical Athens in the 4th century BC,[38] and later,China after the introduction of printing from the 10th century.[39] One factor for the relatively high literacy rates in the early Islamic Empire[which?] was its parent-driven educational marketplace, as the state did not systematically subsidize educational services until the introduction of state funding underNizam al-Mulk in the 11th century.[40] Another factor was the diffusion ofpaper from China,[41] which led to an efflorescence of books and written culture in Islamic society, thuspapermaking technology transformed Islamic society (and later, the rest ofAfro-Eurasia) from an oral toscribal culture, comparable to the later shifts from scribal totypographic culture, and from typographic culture to theInternet.[42] Other factors include the widespread use of paper books in Islamic society (more so than any other previously existing society), the studyand memorization of theQur' an, flourishing commercial activity, and the emergence of theMaktab andMadrasah educational institutions.[43]
Early forms ofmercantilism andcapitalism are thought to have developed in theIslamic Golden Age from the 9th century.[20][31][44]
Early Islamic commerce applied a number of concepts and techniques, includingbills of exchange, forms ofpartnership (mufawada) such aslimited partnerships (mudaraba), and early forms ofcapital (al-mal),capital accumulation (nama al-mal),[20]cheques,promissory notes,[21]trusts (seewaqf),transactional accounts,loans,ledgers andassignments.[22]Organizationalenterprises independent of thestate also existed in the medieval Islamic world, while theagency institution was also introduced.[24][25]Medieval Europe adopted and developed many of these concepts from the 13th century onwards.[20]
Amarket economy was established in the Islamic world on the basis of an economic system resemblingmerchant capitalism.Labour promotedcapital formation in medieval Islamic society, and a considerable number of owners ofmonetaryfunds andprecious metals developedfinancial capital. The capitalists (sahib al-mal) stood at the height of their power between the 9th and 12th centuries, but their influence declined after the arrival of theikta (landowners) and after the state[which?]monopolizedproduction; both these trends hampered any development ofindustrial capitalism in the Islamic world.[44] Somestate enterprises still had acapitalist mode of production, such aspearl diving inIraq and thetextile industry inEgypt.[45]
From the 11th to the 13th centuries, the "Karimis", an enterprise andbusiness group controlled byentrepreneurs, came to dominate much of the Islamic world's economy.[46]The group was controlled by about fifty Muslimmerchants labeled as "Karimis", who were ofYemeni,Egyptian and sometimesIndian origin.[47] Each Karimi merchant had considerable wealth, ranging from at least 100,000dinars to as much as 10 million dinars. The group had considerable influence in most important eastern markets, and sometimes influenced politics through its financing activities and through a variety of customers, includingEmirs,Sultans,Viziers, foreign merchants, and common consumers. The Karimis dominated many of thetrade routes across the Mediterranean, theRed Sea, and theIndian Ocean, and as far asFrancia in the north, China in the east, andsub-Saharan Africa in the south, where they obtained gold fromgold mines. Practices employed by the Karimis included the use ofagents, the financing ofprojects as a method of acquiring capital, and abanking institution for loans and deposits.
Though medieval Islamic economics appears to have somewhat resembled a form of capitalism, some arguing that it laid the foundations for the development of modern capitalism,[48][49] Others see Islamic economics as neither completely capitalistic nor completelysocialistic, but rather a balance between the two, emphasizing both "individual economic freedom and the need to serve the common good."[29]
Abū Dharr al-Ghifārī, aCompanion of Muḥammad, is credited by many as the founder of Islamicsocialism.[50][51][52][53][54]
The concepts ofwelfare andpension were introduced in earlyIslamic law as forms ofZakat (charity), one of theFive Pillars of Islam, during the time of theRashidun caliphUmar in the 7th century. This practiced continued well into the era of theAbbasid Caliphate, as seen underAl-Ma'mun's rule in the 8th century, for example. Thetaxes (includingZakat andJizya) collected in thetreasury of an Islamicgovernment were used to provideincome for theneedy, including thepoor,elderly,orphans, widows, and thedisabled. According to the Islamic juristAl-Ghazali (Algazel, 1058–1111), the government was also expected to stockpile food supplies in every region in case adisaster orfamine occurred. TheCaliphate is thus considered the world's first majorwelfare state.[16][29]
Muslim engineers in the Islamic world were responsible for numerous innovative industrial uses ofhydropower, early industrial uses oftide mills,wind power, andfossil fuels such aspetroleum. A variety of industrial mills were used in the Islamic world, including fulling mills, gristmills, hullers, sawmills, shipmills, stamp mills, steel mills, sugar mills, tide mills, and windmills. By the 11th century, every province throughout the Islamic world had these industrial mills in operation, from al-Andalus and North Africa to the Middle East and Central Asia.[55] Muslim engineers also employedwater turbines, and gears in mills and water-raising machines, and pioneered the use of dams as a source of water power, used to provide additional power to watermills and water-raising machines.[56] Such advances made it possible for many industrial tasks that were previously driven bymanual labour in ancient times to bemechanized and driven by machinery instead in the medieval Islamic world. The transfer of these technologies tomedieval Europe later laid the foundations for theIndustrial Revolution in 18th century Europe.[55]
In addition to government-ownedtiraz textile factories, there were alsoprivately owned enterprises[when?] run largely by landlords who collected taxes and invested them in the textile industry.[57]
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Thelabor force in theCaliphate wereemployed from diverseethnic andreligious backgrounds, while both men and women were involved in diverse occupations andeconomic activities.[58] Women were employed in a wide range of commercial activities and diverse occupations[59] in the primary sector (asfarmers for example), secondary sector (asconstruction workers,dyers,spinners, etc.) and tertiary sector (asinvestors,doctors,nurses,presidents ofguilds,brokers,peddlers,lenders,scholars, etc.).[60]
Muslim women also held amonopoly over certain branches of thetextile industry,[59][additional citation(s) needed] the largest and most specialized and market-oriented industry at the time, in occupations such asspinning,dyeing, andembroidery. In comparison,femaleproperty rights andwage labour were relatively uncommon in Europe until theIndustrial Revolution in the 18th and 19th centuries.[61]
Thedivision of labour was diverse and had been evolving over the centuries. During the 8th–11th centuries, there were on average 63 unique occupations in theprimary sector of economic activity (extractive), 697 unique occupations in thesecondary sector (manufacturing), and 736 unique occupations in thetertiary sector (service). By the 12th century, the number of unique occupations in the primary sector and secondary sector decreased to 35 and 679 respectively, while the number of unique occupations in the tertiary sector increased to 1,175. These changes in the division of labour reflect the increasedmechanization and use ofmachinery to replacemanual labour and the increasedstandard of living andquality of life of most citizens in the Caliphate.[62]
An economic transition occurred during this period, due to the diversity of the service sector being far greater than any other previous or contemporary society, and the high degree ofeconomic integration between the labour force and theeconomy. Islamic society also experienced a change in attitude towardsmanual labour. In previous civilizations such asancient Greece and in contemporary civilizations such asearly medieval Europe, intellectuals saw manual labour in a negative light and looked down on them with contempt.[additional citation(s) needed] This resulted in technological stagnation as they did not see the need formachinery to replace manual labour.[additional citation(s) needed] In the Islamic world, however, manual labour was seen in a far more positive light, as intellectuals such as theBrethren of Purity likened them to a participant in the act ofcreation, whileIbn Khaldun alluded to the benefits of manual labour to the progress of society.[59]
By the early 10th century, the idea of theacademic degree was introduced and being granted atMaktab schools,Madrasah colleges andBimaristan hospitals. In themedical field in particular, theIjazah certificate was granted to those qualified to be practicing physicians, in order to differentiate them from unqualifiedquacks.[63]
There was a significant increase inurbanization during this period, due to numerous scientific advances in fields such as agriculture,hygiene,sanitation,astronomy,medicine andengineering.[64] This also resulted in a risingmiddle class population.
The head of the family was given the position of authority in his household,[citation needed] although aqadi, or judge was able to negotiate and resolve differences in issues of disagreements within families and between them. The two senior representatives of municipal authority were the qadi and themuhtasib, who held the responsibilities of many issues, including quality of water, maintenance of city streets, containing outbreaks of disease, supervising the markets, and a prompt burial of the dead.
Another aspect of Islamic urban life waswaqf, a religious charity directly dealing with the qadi and religious leaders. Through donations, the waqf owned many of thepublic baths and factories, using the revenue to fund education,[citation needed] and to provide irrigation for orchards outside the city. Following expansion, this system was introduced into Eastern Europe by Ottoman Turks.[citation needed]
Taxes were also levied on an unmarried man until he was wed. Non-Muslims were required to pay thejizya, an administrative tax on non-Muslims analogous to zakat (a Muslim only tax). The Jizya was applied only to young able-bodied adult males and exempted non-Muslims from military service. The Muslim state would then be responsible for the administration & security of the Non-Muslims.[65]
To some degree, the early Muslims based theireconomic analyses on theQur'an (such as opposition toriba, meaningusury orinterest), and fromsunnah, the sayings and doings ofMuhammad.
Al-Ghazali (1058–1111) classified economics as one of the sciences connected with religion, along with metaphysics, ethics, and psychology. Authors have noted, however, that this connection has not caused early Muslim economic thought to remain static.[66] Iranian philosopherNasir al-Din al-Tusi (1201–1274) presents an early definition of economics (what he calls hekmat-e-madani, the science of city life) in discourse three of hisEthics:
"the study of universal laws governing the public interest (welfare?) in so far as they are directed, through cooperation, toward the optimal (perfection)."[67]
Many scholars trace thehistory of economic thought through the Muslim world, which was in aGolden Age from the 8th to 13th century and whosephilosophy continued the work of theGreek andHellenistic thinkers and came to influence Aquinas when Europe "rediscovered" Greek philosophy throughArabic translation.[68] A common theme among these scholars was the praise of economic activity and even self-interested accumulation of wealth.[69]
Persian philosopherIbn Miskawayh (b. 1030) notes:
"The creditor desires the well-being of the debtor in order to get his money back rather than because of his love for him. The debtor, on the other hand, does not take great interest in the creditor."[69]
This view is in conflict with an ideaJoseph Schumpeter called the great gap. The great gap thesis comes out of Schumpeter's 1954History of Economic Analysis which discusses a break in economic thought during the five hundred-year period between the decline of the Greco-Roman civilizations and the work of Thomas Aquinas (1225–1274).[70] However, in 1964, Joseph Spengler's "Economic Thought of Islam: Ibn Khaldun" appeared in the journalComparative Studies in Society and History and took a large step in bringing early Muslim scholars to the attention of the contemporary West.[71]
The influence of earlierGreek andHellenistic thought on the Muslim world began largely withAbbasidcaliphal-Ma'mun, who sponsored the translation ofGreek texts intoArabic in the 9th century bySyrianChristians inBaghdad. But already by that time numerous Muslim scholars had written on economic issues, and early Muslim leaders had shown sophisticated attempts to enforce fiscal and monetary financing, use deficit financing, use taxes to encourage production, the use of credit instruments for banking, including rudimentary savings and checking accounts, and contract law.[72]
Among the earliest Muslim economic thinkers wasAbu Yusuf (731–798), a student of the founder of the Hanafi Sunni School of Islamic thought,Abu Hanifah. Abu Yusuf was chief jurist for Abbasid CaliphHarun al-Rashid, for whom he wrote theBook of Taxation (Kitab al-Kharaj). This book outlined Abu Yusuf's ideas on taxation, public finance, and agricultural production. He discussed proportional tax on produce instead of fixed taxes on property as being superior as an incentive to bring more land into cultivation. He also advocated forgiving tax policies which favor the producer and a centralized tax administration to reduce corruption. Abu Yusuf favored the use of tax revenues for socioeconomic infrastructure, and included discussion of various types of taxes, including sales tax, death taxes, and import tariffs.[73]
Early discussion of the benefits of division of labor are included in the writings ofQabus,al-Ghazali,al-Farabi (873–950),Ibn Sina (Avicenna) (980–1037),Ibn Miskawayh,Nasir al-Din al-Tusi (1201–74),Ibn Khaldun (1332–1406), and Asaad Davani (b. 1444). Among them, the discussions included division of labor within households, societies, factories, and among nations. Farabi notes that each society lacks at least some necessary resources, and thus an optimal society can only be achieved where domestic, regional, and international trade occur, and that such trade can be beneficial to all parties involved.[74] Ghazali was also noted for his subtle understanding of monetary theory and formulation of another version ofGresham's law.
The power ofsupply and demand was understood to some extent by various early Muslim scholars as well.Ibn Taymiyyah illustrates:
"If desire for goods increases while its availability decreases, its price rises. On the other hand, if availability of the good increases and the desire for it decreases, the price comes down."[75]
Ibn Taymiyyah also elaborated on a circumstantial analysis of the market mechanism, with a theoretical insight unusual in his time. His discourses on the welfare advantages and disadvantages of market regulation and deregulation have an almost contemporary ring to them.[76]
Ghazali suggests an early version ofprice inelasticity of demand for certain goods, and he and Ibn Miskawayh discussequilibrium prices.[77][better source needed] Other important Muslim scholars who wrote about economics includeal-Mawardi (1075–1158),Ibn Taimiyah (1263–1328), andal-Maqrizi.
| When civilization [population] increases, the available labor again increases. In turn, luxury again increases in correspondence with the increasing profit, and the customs and needs of luxury increase. Crafts are created to obtain luxury products. The value realized from them increases, and, as a result, profits are again multiplied in the town. Production there is thriving even more than before. And so it goes with the second and third increase. All the additional labor serves luxury and wealth, in contrast to the original labor that served the necessity of life.[78] |
| Ibn Khaldun oneconomic growth |
Perhaps the best known Islamic scholar who wrote about economics was Ibn Khaldun ofTunisia (1332–1406),[79] who is considered a forerunner of modern economists.[80][81] Ibn Khaldun wrote on economic and political theory in the introduction, orMuqaddimah (Prolegomena), of hisHistory of the World (Kitab al-Ibar). In the book, he discussed what he calledasabiyya (social cohesion), which he sourced as the cause of some civilizations becoming great and others not. Ibn Khaldun felt that many social forces are cyclic, although there can be sudden sharp turns that break the pattern.[82] His idea about the benefits of the division of labor also relate toasabiyya, the greater the social cohesion, the more complex the successful division may be, the greater the economic growth. He noted that growth and development positively stimulates both supply and demand and that the forces of supply and demand are what determines the prices of goods.[83] He also noted macroeconomic forces of population growth,human capital development, and technological developments effects on development.[84] In fact, Ibn Khaldun thought that population growth was directly a function of wealth.[85]
Although he understood that money served as a standard of value, a medium of exchange, and a preserver of value, he did not realize that the value of gold and silver changed based on the forces of supply and demand.[86] He also introduced the concept known as theKhaldun-Laffer Curve (the relationship between tax rates and tax revenue increases as tax rates increase for a while, but then the increases in tax rates begin to cause a decrease in tax revenues as the taxes to impose too great a cost to producers in the economy).
Ibn Khaldun introduced thelabor theory of value. He described labor as the source of value, necessary for all earnings and capital accumulation, obvious in the case of craft. He argued that even if earning "results from something other than a craft, the value of the resulting profit and acquired (capital) must (also) include the value of the labor by which it was obtained. Without labor, it would not have been acquired."[80]
His theory ofasabiyyah has often been compared to modernKeynesian economics, with Ibn Khaldun's theory clearly containing the concept of themultiplier. A crucial difference, however, is that whereas forJohn Maynard Keynes it is themiddle class's greater propensity tosave that is to blame foreconomic depression, for Ibn Khaldun it is the governmental propensity to save at times wheninvestment opportunities do not take up the slack which leads toaggregate demand.[87]
Another modern economic theory anticipated by Ibn Khaldun issupply-side economics.[88] He "argued that hightaxes were often a factor in causing empires to collapse, with the result that lower revenue was collected from high rates." He wrote:[89]
"It should be known that at the beginning of the dynasty, taxation yields a large revenue from small assessments. At the end of the dynasty, taxation yields a small revenue from large assessments."
During the modernpost-colonial era, as Western ideas, including Western economics, began to influence the Muslim world, some Muslim writers sought to produce an Islamic discipline of economics. In the 1960s and 70s Shia Islamic thinkers worked to develop a unique Islamic economic philosophy with "its answers to contemporary economic problems." Several works were particularly influential,
Al-Sadr, in particular, has been described as having "almost single-handedly developed the notion of Islamic economics"[92]
In their writings, Sadr and the otherShia authors "sought to depict Islam as a religion committed to social justice, the equitable distribution of wealth, and the cause of the deprived classes", with doctrines "acceptable to Islamic jurists", while refuting existing non-Islamic theories ofcapitalism andMarxism. This version of Islamic economics, which influenced theIranian Revolution, called for public ownership of land and large "industrial enterprises", while private economic activity continued "within reasonable limits."[93] These ideas helped shape the large public sector and public subsidy policies of theIranian Islamic revolution.
In the 1980s and 1990s, as theIranian revolution failed to reach the per capita income level achieved by the regime it overthrew, and Communist states and socialist parties in the non-Muslim world turned away fromsocialism, Muslim interest shifted away from government ownership and regulation. In Iran, it is reported that "entered-e Islami (meaning both Islamic economics and economy) ... once a revolutionary shibboleth is indubitably absent in all official documents and the media. It disappeared from Iranian political discourse about 15 years ago [1990]."[91]
But in other parts of the Muslim world, the term lived on, shifting form to the less ambitious goal of interest-free banking. Some Muslim bankers and religious leaders suggested ways to integrate Islamic law on the usage of money with modern concepts ofethicalinvesting. In banking, this was done through the use of sales transactions (focusing on the fixed rate return modes) to achieve similar results to interest. This has been criticized by some western writers as a means of covering conventional banking with an Islamic facade.
In modern times, economic policies of the 1979Islamic Revolution in predominantlyShiaIran were heavily statist with a very large public sector, and official rhetoric celebrating revolution and the rights of the dispossessed, although this tendency has faded over time.[94] InSudan, the policies of theNational Islamic Front party dominated regime in the 1990s have been the reverse, employingeconomic liberalism and accepting "market forces in the formulation of state policies." InAlgeria,Jordan,Egypt, andPakistan,Islamist parties have supportedpopulist policies, showing a "marked reluctance to adopt austerity policies and decreased subsidies."[95]In recent years, Turkey had a rapidly growingeconomy and became a developed country according to theCIA.[96]Indonesia,Saudi Arabia and Turkey are members of theG-20 major economies.
In 2008, at least $500 billion in assets around the world were managed bySharia, or Islamic law, and the sector was growing at more than 10% per year. Islamic finance seeks to promote social justice by banning exploitative practices. In reality, this boils down to a set of prohibitions—on paying interest, on gambling with derivatives and options, and on investing in firms that make pornography or pork.[97]
Another form of modern finance that originated from the Muslim world ismicrocredit andmicrofinance. It began in the 1970s inBangladesh withGrameen Bank, founded byMuhammad Yunus, recipient of the 2006Nobel Peace Prize. Among 6 representative studies selected from a sample of more than 100 studies as being methodologically most sound, five found no evidence that microcredit reduced poverty.[98][99]
Throughout history, socialism has been accepted by many Muslim thinkersand Muslims have presented different views on this school. They somehow saw socialism and Islam as non-contradictory. In "Iran", the nature of "Islamic economy" has been widely disputed by "Iranians"has taken and for example, one view of the Islamic economic system was considered a "socialist economy" and they accepted it.,[100][101] But on the other hand, there have been Muslims or other Muslim groups who have taken a strong stance against socialism. In general, in Iran, there have been Iranians who agree or disagree with these views. For example, there is another opinion had condemned all (other) "isms" as doomed to failure.[102][103]
One issue "generally absent" from contemporaryIslamist economic thought (exceptSayyid Qutb) and action "whether moderate or radical" is the question ofagrarian reform. Opposition to agrarian reform even played a role in Islamist uprisings (Iran 1963, Afghanistan, 1978).[104] At least one observer (Olivier Roy) believes this is primarily because it would "imply a reexamination of the concept of ownership", and in particular "throw into question theWaqf, endowments whose revenue ensures the functioning of religious institutions."[104] In the Islamic Republic ofIran, for example, waqf holdings are very large (inKhorasan Province, "50% of the cultivated lands belong to the religious foundation Astan-i Quds, which oversees" theImam Reza shrine inMashhad).[104] Thus questioning waqf property would mean questioning "the foundation of the financial autonomy of the mullahs and mosques", particularly amongShia Muslims.[104]
In June 2005, theDow Jones Indexes inNew York City andRHB Securities inKuala Lumpur teamed up to launch a new "IslamicMalaysia Index"—a collection of 45 stocks representing Malaysian companies that comply with a variety of Sharia-based requirements. For example, total debt, cash plus interest-bearing securities andaccounts receivables must each be less than 33% of the trailing 12-month average capitalization.[citation needed] Also, "gambling" on derivatives and options, and on investing in firms that make pornography or pork are also unacceptable. Islamic bonds, orsukuk, use asset returns to pay investors to comply with the religion's ban on interest and are currently traded privately on theover-the-counter market. In late December 2009Bursa Malaysia announced it was considering enabling individuals to trade Shariah-compliant debt on its exchange as part of a plan to attract new investors.[105]
The idea of the degree most likely came from Islam. In 931 AD the Abbasid caliph al-Muqtadir had all practising physicians examined and those who passed were granted certificates (ijazah). In this way, Baghdad was able to get rid of its quacks (Hitti, 1970: 364). Theijazah was the principal means by which scholars and Sufis passed on their teachings to students, granting them permission to carry on their teachings. Although the learned scholars of Islam taught in formal institutions of learning such as themaktab, thekuttab, themadrasah and thejami`ah, the degree was personally granted by the scholar to the student.
Some studies have found marked decreases in overall poverty levels, including declining levels of extreme poverty (Khandker, 2005), while other studies do not find the same direct effect (Morris and Barnes, 2005; Kan, Olds, and Kah, 2005; Goetz and Gupta, 1996). Still, other studies provide mixed results (Copestake, Bhalotra, and Johnson, 2001; Morduch, 1998).
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