Sayyid Abul Ala MawdudT FIRST PRINCIPLES OF ISLAMIC ECONOMICS Edited by Khurshid Ahmad Translated by Ahmad Imam Shafaq Hashemi THE ISLAMIC FOUNDATION
Contents Transliteration Table v xii Foreword " xiii Translator's Note xxxvi Author's Preface * '> xxxviii Introduction xxxix PART ONE THE ISLAMIC CONCEPT OF ECONOMIC WELL-BEING 1. Mankind's Economic Problems and Their Islamic Solutions 3 1.1. The problem of a partial approach 4 1.2. The real issue 7 4.3. The root cause of economic mismanagement 9 1.4. Self-aggrandizement and luxuries 9 1.5. Capital worship 11 1.6. The element of antagonistic competition 12 1.7. Cartels and monopolies 13 1.8. TJie recipe of communism. 15 1.8.1. The super capitalist. 1 5 1.8.2. An exploitative system 15 1.8.3. Slaughter of the,self 16 1.9. The fascist solution ; 17 1.10. The Islamic solution 17 1.10.1. Basic rules 17 1.10.2. Earning money 18 1.10.3. Ownership rights 19 1.10.3.1. Rule for spending money 19 1.10.3.2. Eliminating the capitalist trend 19 1.10.3.3. Circulation of wealth and social security 20 1.11. Points to ponder 22
FIRST PRINCIPLES OF ISLAMIC ECONOMICS 2. Economic Teachings of the Qur'an 24 2.1. Fundamental truths 24 2.2. Parameters of permissible and impermissible 25 2.3. Parameters of private ownership 26 2.4. Irrational concept of economic parity 30 2.5. Monasticism or moderation and balance 33 2.6. Distinction between Haldl and Hardm means of livelihood 34 2.7. Forbidden means of livelihood 35 2.8. Prohibition of stinginess and hoarding 38 2.9. Lust for money and greediness '-.. _ 39 2.10. Unchecked spending 39 2.11. Correct way of spending money 41 2.12. Reparation for sinful transgressions 43 2.13. Preconditions for the Divine Acceptability of charity 43 2.14. Charity in the Way of Allah 45 2.15. Collection and distribution of Zakdh 48 2.16. One-fifth of revenue from war gains 49 2.17. Disbursement of Zakdh funds 50 2.18. Division of inheritance 50 2.19. The will 52 2.20. Rights of those of weaker understanding 52 2.21. Safeguarding public interest in state holdings 53 2.22. Guiding principle about taxation 57 2.23. Salient features of Islamic economics - a resume 57 2.24. Index of source material 60 3. The Differences between Islam and Capitalism 61 3.1. Distinction between lawful and forbidden means of livelihood 61 3.1.1. Bribery and embezzlement 62 3.1.2 Breach of trust and misappropriation of funds, public or ( private 62 3.1.3. Theft and burglary 63 3.1.4. Mishandling of the orphan's property 63 3.1.5. Fraudulent transactions/disregard of weights and measures, 63 3.1.6. Trading in immorality and all means of obscenity and promiscuousness 64 3.1.7. Income generated through the sex trade, brothels, adultery or fornication 64 VI
CONTENTS 3.1.8. The production, sale, transportation and marketing of alcoholic beverages 65 3.1.9. Gambling, betting, lottery and all means of income based not on one's labour but on chance 65 3.1.10. Idol-making trading in idols and serving in temples 65 3.1.11. Fortune-telling and soothsaying 66 3.1.12. Usury and all forms of interest-based transactions 66 3.2. The accumulation of wealth 67 3.3. Money is to spend 67 3.4. Zakah ^.. - 73 3.5. Law of inheritance 76 3.6. War gains and division ofj the conquered land's revenue 76 3.7. Injunctions about economy and balance 78 4. The Economic Philosophy of Islam 81 4.1. Basic values of the economic philosophy of Islam 81 4.1.1. Social justice 81 4.1.2. Equitable economic system 82 4.1.3. People-friendly political system 82 4.1.4. Equality of opportunity 82 4.2. Eight fundamental principles of the economic philosophy of Islam 83 4.2.1. First principle: General accessibility of the bounties of nature 83 4.2.2. Second principle: The right to make a living 83 4.2.3. Third principle: The right to ownership 83 4.2.4. Fourth principle: The spirit of healthy competition 84 4.2.5. Fifth principle: No artificial way to enforce equality 84 4.2.6. Sixth principle: No 'free economy' 85 4.2.7. Seventh principle: Duties obligatory upon individuals 85 4.2.8. Eighth principle: Duties obligatory upon society' 86 5. The Principles and Objectives of Islam's Economic System 87 5.1. Basics of the Islamic economic system 87 5.2. The objectives of Islamic economics 88 5.2.1. Personal freedom 88 5.2.2. Harmony in moral and material progress 89 5.2.3. Promotion of cooperation, harmony and justice 90 vn
FIRST PRINCIPLES OF ISLAMIC ECONOMICS 5.3. Basic principles of Islam's economic system 91 5.3.1. Parameters of private ownership 91 5.3.2. Equitable distribution of wealth 92 5.3.3. Social obligations 94 5.3.4. Zakdh 96 5.3.5. Law of inheritance 97 5.4. Position of labour, capital, and organization 98 5.5. Zakdh and social welfare 99 5.6. Interest-free economy 100 5.7. Interrelationship between economic, political and social systems 101 6. Some Principles of Economic Life 103 6.1. Basic values of Islamic society 103 6.2. The Islamic path of moral and economic rejuvenation 105 6.3. The concept of earning and spending 107 6.4. Principles of spending 109 6.5. Principles of moderation and balance 111 6.6. Economic honesty and justice 112 6.7. Distributive justice 113 PART TWO THE ECONOMIC SYSTEM OF ISLAM: SOME BASIC FEATURES 7. The Question of Land Ownership 119 7.1. The Holy Qur'an and the question of private ownership 119 7.2. Precedents of the Holy Prophet and his Caliphs 122 7.2.1. First category of land 122 7.2.2. Second category of land 124 7.2.3. Third category of land 126 7.2.4. Fourth category of land, 128 7.3. Ownership rights on the basis of settlement 129 7.4. Award of state lands 132 7.5. The Shari'ah perspective on the award of state lands 134 7.6. Feudal estates and Islamic Shari 1 ah 135 7.7. Respect for ownership rights. 136 7.8. Islamic social order and private ownership 138 7.9. The question of delimitation of agricultural land 140 7.10. Sharecropping between landlord and farmer 141 7.11. Principles of property management 142 viu
CONTENTS 8. The Question of Interest 144 8.1. Islamic injunctions concerning interest 144 8.1.1 Meaning of Ribd 144 8.1.2. Ribd of the Days of Ignorance 146 8.1.3. Basic difference between Ribd and Bay' 146 8.1.4. Rationale for prohibition 148 8.1.5. Strict nature of the ban 149 8.2. Need for interest: a rational reassessment 150 8.2.1. Compensation for elements of risk and sacrifice 150 8.2.2. Compensation for opportunity and grace period 154 8.2.3. Sharing of profit 155 8.2.4. Compensation for time 156 8.2.5. Reasonableness of'an interest rate 158 8.2.6. Rationale for varying rates of interest? 160 8.3. 'Economic benefits'of interest? 162 8.4. Need and utility of interest? 164 8.5. Demerits of interest 167 8.6. Economic growth without interest 171 8.6.1. Some misunderstood facts 171 8.6.2. First step towards reform 174 8.6.3. End result of a ban on interest 175 8.7. Availability of loans in an interest-free system 177 8.7.1. For personal needs 177 8.7.2. For commercial purposes 179 8.7.3. For non-productive public sector needs 180 8.7.4. International lending 181 8.7,.5. Capital needs of profit-making projects 182 8.8. Islamic modes of banking 184 8.9. Economic and industrial loans from non-muslim countries 187 9. Zakdh in Theory and Practice 189 9.1. Essence of Zakdh 189 9.1.1. Meaning 189 9.1.2. Apostolic tradition 189 9.2. Zakdh's place in social life 192 9.3. The Divine Command concerning Zakdh 197 9.4. Various categories of Zakdh distribution 199 9.4.1. Al-Fuqard' 199 9.4.2. Al-Masdkln 200 IX
FIRST PRINCIPLES OF ISLAMIC ECONOMICS 9.4.3. Al-'Amiltn 200 9.4.4. Mu'allafafl-Qulub or 'those whose hearts are to be reconciled' 201 9.4.5. Fil-Riqdb or 'to free those in bondage' 201 9.4.6. Al-Ghdrimin or 'those burdened with debt' 201 9.4.7. H-SaHWJj/i or'in the Way of Allah' 201 9.4.8. Ibn al-sabil or 'the Wayfarer' 202 9.5. Basic rules of Zakdh 204 9.6. Is any change possible in Nisdb and the rate of Zakdh's deduction?. 220 9.7. Company shares and Zakdh 222 9.8. Zakdh's applicability in Mushdrakah and Muddrabah 225 9.9. Prescribed minimum limit for Kunuz (gold and silver) 226 9.10. The difference between Zakdh and tax 228 9.11. Is it permissible to levy income tax over and above Zakdh 7. 229 10. Islam and Social Justice 230 10.1. Falsehood in the garb of truth 230 10.1.1. Deception One: capitalism and secular democracy 230 10.1.2. Deception Two: social justice and communism 231 10.1.3. The modern Muslim's intellectual servility 231 10.2. Social justice in theory and practice 232 10.2.1. Islam alone guarantees social justice 233 10.2.2. Social justice: the goal before Islam 233 10.2.3. Growth and development of the human personality 234 10.2.4. Personal accountability 235 10.2.5. Individual freedom 235 10.2.6. Social institutions and their writ 236 10.3. Failings of capitalism and communism 237 10.4. Communism: the worst form of social oppression 237 10.5. Justice in Islam 239 10.5.1. Parameters of personal freedom 239 10.5.2. Preconditions for the transfer of wealth 240 10.5.3. Restrictions on the use of wealth 241 10.5.4. In service of the society 241 10.5.5. Eradication of injustice 241 10.5.6. Nationalization and public interest 242 10.5.7. Use of the public treasury (Bayt al-mdl) 242 10.5.8. The basic issue! 242
CONTENTS 11. Issues of Labour, Insurance and Price Control 244 11.1. Labour-related issues and their solutions 244 11.1.1. What has caused the damage? 244 11.1.2. The real need 245 11.1.3. Resolution of problems 246 11.1.4. Agenda for reform 247 11.2. Insurance and measures for reform 252 11.3. The question of price control 255 12. Recodification of the Economic Laws of Islam 258 12.1. The constant and the variables 258 12.2. The need to modernize, 260 12.3. Essential prerequisites for modernization of statutes and by-laws 261 12.3.1. First prerequisite 261 12.3.2. Second prerequisite 262 12.3.3. Third prerequisite 264 12.3.4. Fourth prerequisite 265 12.4. General rules of exception 267 12.5. Relaxation in the case of interest 269 Glossary 273 Short Biographies 279 Index 287 XI