Source: The Independent
Around 300 years ago, the bazaars of the Middle East were overflowing with luxury goods. The commercial centres of the region attracted all variety of fortune seekers, speaking numerous languages. There was nothing to indicate that the region would not continue to be economically prosperous. But then the trajectory changed. The Middle East nosedived into a downward spiral of underdevelopment. So what went wrong?
The major causes of the economic stagnation of the Middle East, which includes Turkey, are not colonisation, or the conservative and anti-scientific attitudes of the people, argues Timur Kuran, a professor of Islamic studies at Duke University. While colonisation certainly played a role, many former colonies, such as Brazil and India, have managed to overcome the historic hurdles of occupation. Conservatism and anti-scientific attitudes are as prevalent in Europe as the Middle East, and they have not been a barrier in the development of the West. The real cause of underdevelopment in the Middle East, Kuran suggests in this meticulously argued book, is the Sharia, or Islamic law.
When it was first formulated, the Sharia developed institutions, such as contract law, that were advanced and sophisticated for its time. But the law has not evolved and adjusted to the new world of business and finance. There have been, throughout history, many attempts to reinterpret it, eliminate ambiguities and resolve contradictions. In some areas, such as tax collection, innovations never ceased. However, the substance of the law was not transformed significantly to cope with radical changes in the range and magnitude of economic activity. The reinterpretations were seldom more than odd ripples in a pond.
Kuran identifies contract law, rules of inheritance, the ban on usury, and the death penalty for apostasy as key elements of Islamic law that thwarted economic development of the Middle East. His goal is not to rubbish Islamic law. Indeed, he takes pains to explore its positive features. But to demonstrates convincingly that lack of innovation generated negative consequences, even from the progressive aspects of Islamic law.
During the Middle Ages, business transactions were based on personal relationships. Islamic contract law, on the other hand, promoted cooperation outside family and kin. Complete strangers could come together to form a business partnership on the basis of mutual interest that was recognised in law and upheld in courts. The problem was that an Islamic partnership could be terminated at will by any partner. The death of a partner also dissolved the partnership, with subsequent profit and loss going solely to the survivor. The children and family of the deceased partner could neither inherit nor automatically take his place.
This meant that durable business partnerships that could last generations did not emerge in the Middle East. The private enterprises in the region became atomistic. When businessmen came together to pool their resources in profit-making endeavours, their cooperation was only temporary and seldom lasted more than a few months.
The problem was compounded by the egalitarian nature of Islamic laws of inheritance. These were designed to dissipate wealth in society and prevent its accumulation in fewer and fewer hands. But it also meant that business empires of successful merchants never survived after them, as their estates were divided and dispersed into several small segments. Recombination and re-emergence of the empire was almost impossible. Everything had to begin again from ground zero with new partnerships.
The ban on usury made it difficult for merchants to obtain credit and suppliers to lend money. Often, it increased the cost as both suppliers and users of credit discovered innovative strategies to bypass the prohibition. The bar on interest also meant that banks could not emerge. There was no incentive to trade shares; or any need for standardised accounting.
The punishment for apostasy made it impossible for Muslims to do business with non-Muslims. They risked life and limb if they conducted business under a non-Muslim legal system, or took disputes to non-Muslim judges.
To make matters worse, social services in Middle Eastern societies were provided by pious foundations, or waqfs. These charitable trusts, set up under Islamic law and supervised by religious officials, provided the region with such essential services as water supplies and looked after orphanages, schools and colleges. They could outlive their founders and continue for perpetuity. But as they were not self-governing, their caretakers could not maximise profits. They thus became an impediment to the growth of corporations.
All this meant that the Middle East was very late in adopting key institutions of modern economy. The laws, institutions and organisational forms, that could mobilise productive resources on large scales within enduring private enterprises, so essential for economic development, just did not emerge in the region.
This is a fresh and thought-provoking argument. But it is based on the assumption that Western financial institutions, and self-serving corporations, are the best possible model for development. Given the havoc that these institutions have caused in recent times, and the fact that injustice and obscene wealth is integral to their make-up, I think it is an assumption too far.
One also needs to consider why Islam insists on the egalitarian distribution of wealth and historically suppressed the emergence of monopoly capital. Perhaps it has something to do with a socially conscience vision of society that emphasises genuine equity and justice? Kuran’s thesis is contentious; but it does provide us with an incentive to reformulate Islamic law. It is an excellent starting-point for a debate long overdue.
Ziauddin Sardar’s ‘Reading the Qur’an’ will be published by Hurst in May
Some reading materials to develop modern Islamic financial system, free of usury
The USA debt ceiling, Islamic principles and the Chinese juggernaut!
https://www.alislam.org/egazette/egazette/march-2009-egazette/
https://www.alislam.org/egazette/egazette/september-2009-egazette/
What if the top one percent in USA were true Muslims?
I am inviting authors for a multi-author book to suggest how the present Western financial system can be Islamic, with a little fine tuning. The book should include, what we can learn from the Chinese success story.
Such an effort, I think is pragmatic and realistic, otherwise a lot of what goes under the name of Islamic banking etc. in my opinion is wishful thinking or plain fraud.
I think only those who fully understand the reasons of success of the Western financial system in the last two to three centuries are able to genuinely contribute in demystifying financial systems, improve the existing systems or propose new ones. Efforts of others usually is no more than pious rhetoric at best and dishonesty in worst case scenario.
If you have secular qualifications in finance and economics and are ready to defend Islam and its core principles, please leave comments in this section. I will contact you.
WHY YOU SHOULD READ THE BOOKS?
DR.IQBAL S. HUSSAIN
Books are the unique gift God has bestowed on man. As the first step on the path of reform and renovation heavenly scriptures were designed to decorate the destiny of man. They were given to the prophets and philosophers for imparting guidance and enlightenment. In a world wallowing in darkness and decadence books became a beacon light in order to enlighten the confines of ignorance and injustice. As indispensable affirmative they were identified with the process of evolution ad progress. Intellectual corridors were carved out to create the avenues of creativity and consummation.
In the early phases of intellectual evolution special emphasis was to be placed on developing the capacity to think and act. A creative view of consciousness was to be evolved to obviate the patterns of constricted thinking based on static, naturalistic modes of traditional thought. The constraints placed by controlled convictions severely hindered the process of perception and progress.
With the brilliance of human ingenuity and literary endowments man could now evaluate a whole ensemble of relations between cosmos and creativity. Man, however, had to salvage the creature itself and was consequently confronted with the convulsions of present and future predicaments. He had to explore the universe and clear the environments from filth and vermin. In order to ensure the mechanics of mental and physical movements books had to be written and deployed. This was imperative to facilitate the functioning of faculties reposed in mind and body. Besides offsetting the primitive patterns of ‘deficient’ thoughts and deviations books also helped the mind to participate more actively in the art of creative imagination. Thus was initiated a phase of adaptation and evolution. Methods of knowledge were conceived to evaluate the requirements of scientific advance and civilization. The educator was assigned the responsibility of ascertaining the requirements of reading and defining the modes of progressive thought. It was the focal point of the phenomenon of change. Thus books emerged as the main instrument to stimulate the process of imaginative thinking and creative reading and writing. Consequently a series of philosophers, scientists and writers appeared on the world scene both to write the dialectic of metaphysics and develop the scientific thesis for discovering the secrets of galaxies.
Humanity which was groaning under the debris of oppression and degeneration could now liberate itself from the clutches of undernourishment and deficient existence. Man was able now to think and act more constructively and imaginatively. Now were accumulated the deposits of knowledge and enlightenment which entitled man to higher levels of social, cultural and economic advance. The scientific knowledge which was considered as an anathema was imbibed as an imperative for progress and prosperity. All these outpourings which emanated effusively from the pages of books augured well for the future of humanity and civilization. Now were the promising possibilities to decorate the destiny of mankind. Now were the structures evolved for nourishment of both mind and soul. The present epoch is the practical expression of what books have achieved in the past and what improvements they can effect in future. Thus reading and writing is an imperative and the nations which do not respond to this affirmative are doomed to decline.
Creative Books by IQBAL S. HUSSAIN
1. TEARS FOR PAKISTAN —the dream that has gone sour: Diagnosis of the current ailments and the urgent therapy Rs.700.00
2. THE MUSLIM DELUSION –ISLAM between Orthodoxy & Enlightenment, RECOMMENDED BY HEC FOR POSTGRADUATE STUDIES
Rs.700.00 3.
3. DECLINE OF THE MUSLIM UMMAH: declared as the best book and inducted in the Services Club of the GHQ.
Rs. 600.00
4. ISLAM & THE CLASH OF CIVILIZATIONS: Responding to Huntington’s Theory of the Clash of Civilizations Rs. 600.00
. 5. THE QUR’AN & MODERNISM: Beyond Science and Philosophy
Rs. 600.00
6. TERRORISM IN ACTION: Why Blame Islam? Responding to the Western reaction in the aftermath of 9/11 attack Rs. 600.00
7 PAKISTAN IN CRISES: A Proud Nation, but Failing State
. 8. QURAN-HAKIM: Falsafa Husn-o-Hyat (URDU) A treatise on the aesthetics and philosophy of the QUR’AN Rs500.00
9. THE MUSLIM DELUSION –updated and improved edition (2012)
Rs. 700.00
10. ISLAM & WESTERN CIVILIZATION ( Not in stock)
11. INSAN KI TALAASH (in the pipeline)
Dr. IQBAL S. HUSSAIN is an ex-Director, syndicate of Examinations, Cambridge University, UK.
Ex-Governor, Langford School, London, and author of more than ten books on science and civilizations, philosophy and politics. Tel; 0092-55-3842583, Cell; 03007792452, FACEBOOK.com/iqbalsyed.hussain
If I can just comment on the economical system. I can say the Chinese approach is based on warfare and is well planned. have you ever heard of the 1000 year plan for China to rule the earth?
Well what you see from the Chinese is that plan bearing fruit. If We want to have a financial system we have to have a direction with a LONG range plan. Anything done quick with money will be undone quick.
I very much agree with Harry. I think part of the present economic chaos is that politicians with a time-span of 4 to 8 years cannot be expected to plan in a longer term.
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