Fie chapter1

CHAPTER 1
ISLAM, ITS WORLDVIEW AND
ISLAMIC ECONOMICS

1/02/2009 FOUNDATIONS OF ISLAMIC ECONOMICS 1

CHAPTER OUTLINE

1. Why Islamic Economics?
2. Worldview
3. Islamic Economics

1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 2

1. Why Islamic
Economics?


Quest for Alternatives

• Renaissance and birth of secularism
• Theories replace religion to organize
people’s life
• Human frustration and need for a change


Why not Conventional Economics?

• No human endeavor value free
• Schumpeter (1954): Analytic effort is of necessity preceded
by a pre-analytic cognitive act, called vision
• Acikgene (1994): Nature of human mind cannot but
perceive a problem within a scheme of constructive unity
• J. S. Mill (1836): Political economy, therefore, reasons
from assumed premises


Why not Conventional Economics?

• Economics are VALUE-LOADED
• All aspects of human activity are based/influenced by
one’s worldview/vision
•Our values are derived from our WORLDVIEW


Why Islamic Economic System?
• Al-sahwah al-Islamiyyah or Islamic revivalism/resurgence in
early 1970s in Muslim countries
• Failure of conventional growth models
• Oil boom in 1970s
• Muslim countries try to find solutions to “own” economic problems

• Continuous intellectual discourse on economic issues and
related disciplines from Islamic perspectives
• Makkah (1976): Birth of Islamic Economics discipline
• Islamabad (1983)
• Kuala Lumpur (1992)
• Loughborough (2000)


2. WORLDVIEW


Worldview
• Vision of reality and truth that appears before one’s mind
eye, revealing what existence is all about
• Governs way people interpret the world
• Worldview of Islam encompasses both al-dunya an al-
akhirah, in which the dunya aspect must be related in a
profound and inseparable way to akhirah aspect and in
which the akhirah aspect has the ultimate and final
significance. Such worldviews may consist of the
following elements:
1. God
2. Religion
3. Man
4. Nature/Universe
1/02/2009
5. Aim in Iife 9
FOUNDATION OF ISLAMIC ECONOMICS

Islamic Worldview
• Centered on the principle of Tawhid or unity of God
• Al-Attas: “Ru’yat al-Islam Lilwujud” or “The view of Islam
about existence”
• Man, his aim in life, the universe, the way he interacts
are all inter-related
• Man’s behavior governed by rules of the Quran and Sunnah
• Pursue material gain with a view that existence in this world and
hereafter is important


ISLAMIC VS WESTERN WORLDVIEW
• Does Islamic worldview different from conventional
worldview?
• Since factors affecting worldviews differ, it is natural to also have
different worldviews, thus different theories to explain human
behaviour

• Islamic worldview is based on Islam and its sources of
knowledge
• A complete worldview at the time of revelation-fundamental
concepts in the Quran are not open for changes in meaning


1. ISLAMIC VIEWS ON RELIGION
• Not equivalent to religion as understood by the west
• Religion reduced to a private matter between individual and God
• No role to play in determining public affairs
• Science replaced religion as authority
• Religion for infantile man; science for modern/mature man

• Watt (1979):
“Religion means a way of spending an hour or so on Sundays in
practices which give him support and strength in dealing with the
problem of daily life, and encourage him to be friendly towards others…;
has little impact or nothing to do with commerce / politics / industrial
relationships”


1. ISLAMIC VIEWS ON RELIGION
• To understand position of religion in the west and its
implications on economic discipline and activity, need to
understand three aspects:
• Secular
• Secularization
• Secularism


SECULAR
• Latin: sacculum, meaning space and time, i.e. here and
now
• Secular activities: deal with the “here and now” or
activities just for this world and during/in our lives
• Secular worldview concerns with only life in this world
• Islamic worldview encompasses this life and hereafter
• Not “anti this world”: in fact, Islam has very clear guideline on
how to undertake life in this world
• Various aspects of living, including economics


SECULARISM
• Ideology that says only this world is relevant
• When combined with materialism
• It denotes that only this world is real
• Hence, any reference to the ‘hereafter” is irrelevant

• Economics should be conducted purely on “costs and
benefits” of this world
• Islam would not be able to accept this ideology


SECULARIZATION
• A process of gradual decline of religion and its authority
over life; separation between life and religion

• Experience of Christian/western civilization since 17th
century - in the age of enlightenment as elaborated by Cox
(1965) and al-Attas (1978)

• Elliade (1987) in Encyclopedia of Religions
• Dichotomy between religion and remainder of human life is a
western product and concern

• Distinction between the sacred and profane, between religion and
other aspect of human endeavor is a result of process of
secularization

SECULARIZATION
• Having three components:

• Disenchantment of nature: nature as an object to be exploited
by man. In Islam, nature as a sign of Allah’s existence, to be
utilized by man

• Desacralization of politics: ultimate authority given to man. In
Islam, the ultimate authority and power belongs to Allah

• Deconsecration of values: all norms, values, laws can be
changed according to man’s preferences. In Islam, man cannot
over-rule God


1. ISLAM VIEWS ON RELIGION
• Ideology of secularism and secularization as a
philosophical process is incompatible with Islam and its
worldview

• Islam cannot accept secularization (dealing with only here
and now): contradictory, incoherent, meaningless
• Islam has no problem with involvement of man in secular pursuits
• In Islam, religion is not human creation, but it represents a “way of
life” - Din


ISLAM IS DIN
• The term “din” used to denote “religion” in the Qur’an
• Comes from root word “dana”
• Mentioned 92 times in the Qur’an
• Meaning debt, obedience, judgement / way / custom; inter-
connected to explain “religion”
• Does not limited to rituals/faith
• A way of life
• Detailed code of conduct
• Willing and conscious submission to Allah in all aspects of life
• Economics and its related activities are potentially ibadah or acts
of worship
• Based on revealed knowledge, man uses his intellect to
organize life on earth: Intention, action according to shari’ah


SIGNIFICANCE OF DIN
The primary significances of the term ad-Din can be
reduced to four:

• Indebtedness
• Submission
• Judicious Power –becoming strong, powerful, mighty
and elevated in rank when man enslaves himself to
God and make the right choice
• Natural Inclination –the natural tendency of man to
form societies and obey laws and seek a just
government.

AL-MITHAQ-THE PRIMORDIAL
COVENANT

• We did indeed offer the Trust to the Heavens and the Earth
and the Mountains; but they refused to undertake it, being
afraid thereof: but man undertook it;- He was indeed unjust
and foolish (AL-ahzab, 72)

• And [mention] when your Lord took from the children of Adam
- from their loins - their descendants and made them testify of
themselves, [saying to them], "Am I not your Lord?" They
said, "Yes, we have testified." [This] - lest you should say on
the day of Resurrection, "Indeed, we were of this unaware.“
(al-’Araf, 172)


Al-Islam & Al-Shari’ah
• Al-Islam is the Din of all prophets but shari’ah vary among
prophets

• Shari’ah of Prophet Muhammad s.a.w. is the most
comprehensive and complete

• It is guidance in all aspects of the Muslim’s life, private and
public, individual and social, spiritual and material, and
political and economics


Al-Islam

Al-Shari’ah

Al-Aqidah Al-Akhlaq Al-Fiqh


2. ISLAMIC VIEWS ON GOD
• Belief in unity of God, Tawhid
• Oneness of God
• The core concept /foundation of Islamic worldview
• Other aspects of Islamic worldview are the logical extensions
• Expressed in Kalimah shahadah

•3 aspects of tawhid
• Oneness of the lordship of Allah: to believe that there is only one
lord for entire universe
• Oneness in the worship of Allah: to believe that none has right to
be worship but Allah
• Oneness of the names and the qualities of Allah: none can be
qualified with the Names/qualities of Allah


2. ISLAMIC VIEWS ON GOD
• Thus, as a Muslim (one who submits) is to do as God has
directed and for His sake

• Beautiful names of Allah which have implications for
economics
• Al-razzaq (the Provider)
• Al-malikul mulk (the eternal owner of sovereignty)
• Al-muqsit (the equitable)


3. ISLAMIC VIEWS ON MAN
• Arabic: “Insan” from root word “nasiya” means “he forgot”:
(Al-a’raf: 173): “…Am I not your Lord? They said: Yes! We testify, lest
you should say on the day of resurrection: ‘verily, we have been
unaware of this’.”

• The best of creation, created good, comprising of body and
spirit: (At-teen:4): “verily, we created man of the best stature (mould)”

• Given ‘aql and knowledge: (al-Baqarah: 31): And He taught
Adam of all things


• Created as vicegerent (khalifah) on earth:
(al-Baqarah: 30): and remember when your Lord said to the angels: ‘I
am going to create a vicegerent on earth…”

• Created as ‘abd (worshipper) of God:
(ad-Dhariyat: 56): “I created not the Jinns and human except to worship
Me”

• Implications of roles:
• As khalifah: nature, universe and other creations are entrusted to
man for his utilization
• As ‘abd: man does not have the ultimate authority other than to
follow the will of God


• Cannot be khalifah unless you are first and foremost an ‘abd

• Nasr (1990): there is no more dangerous creature on earth
than a khalifah Allah who no longer considers himself to be an
‘abd Allah.

•At-Tin (4-6): “Verily , We created man in the best stature
(mould); Then We reduced him to the lowest of the low (As-
falasafilien); Save those who believe and do righteous. Then
they shall have a reward without end (paradise)…”


•Man in loss (Al-’Ashr 1-3): By the time; verily, man in loss;
except those who believe and do righteous good deeds….”

•Al-’Araf, 179: “And surely, We have created many of the jinns
and mankind for Hell. They have hearts wherewith they
understand not, they have eyes wherewith they see not, and
they have ears wherewith they hear not (the truth). They are like
cattle, nay even more astray; those! They are the heedless
ones”


4. ISLAMIC VIEW ON NATURE
• Nature/universe in the Quran:
• Comprise of “heavens and earth and all in between”
• Mention about vegetation and fruits, night and day, heavens and
earth, human being, rain
• Another sign to direct man to worship Allah, the Creator
• Nature is a bounty from God
• Must be utilized in the best way possible, in accordance with
God’s will, remembering that it is part of God’s creation
• Man as trustee to manage nature
• 2 types
• Material world (visible)
• Unseen world (ghayb or invisible): believe in the existence of God,
angels, hell and paradise


5. ISLAMIC VIEWS ON AIM IN LIFE
• Primary aim of life for human as described by Islam
• To achieve happiness (falah)
• Ultimate success and pleasure of Allah

• Al-Ghazali describes means through which man can
prepare for happiness in this world and hereafter (sa’adah)
• Al-nafsiyyah – soul
• Al-jismiyyah – body
• Al-kharijiyyah – external good
• Al-tawfiqiyyah – divine grace


ATTAINING FALAH/SA’ADAH AL-
HAQIQIYYAH

• Al-nafsiyyah – the goods of soul
• Comprising faith (iman) and good character
• Achievable through action (‘amal)
• Iman = Amal : soul can only be improved if man has the knowledge
• Good character comprise of:
• Temperence - repression of desire and anger
• Justice – observing of moderation in all actions
• Application to economics: Ethical requirements in business activities

• Al-jismiyyah – the goods of the body
• Second important
• Health, strength, long life and pleasant appearance


ATTAINING FALAH
• Al-kharijiyyah – external good
• Useful for happiness
• Wealth, influence, family and noble birth (family in which
knowledge and piety are instilled to all members)

• Al-tawfiqiyyah – divine grace
• Essential for happiness
• Comprise of divine guidance (hidayah), divine direction, divine
leadership and divine strengthening

• Primary means of achieving falah are goods of the soul,
that can be acquired with help of bodily and external goods,
if he is given divine grace


In conclusion,
Islamic Worldview ≠
Secular Worldview


3. Islamic Economics


ECONOMICS AND ISLAMIC ECONOMICS

• Economics: study of human behavior in relation to
the use of scarce resource to fulfill unlimited wants
• Economics is a field that deals with management of
scarce resources (production, consumption and
distribution)
• Due to scarcity, we have to make choices
• Man interacts with other human beings and nature
to make these choices


ECONOMICS AND ISLAMIC ECONOMICS
• Economics is both an activity and a discipline
• How man interact is determined both by natural laws and
social laws/culture in a system, i.e. economic and financial
systems
• Social laws/culture based on worldview of people

• Systems are products of society

•The discipline is derived from one’s worldview


ISLAMIC ECONOMICS
• Part of din
• Deals with production, consumption and distribution
activities of man according to Islamic worldview
• Make choices according to Islamic description, analysis,
prescription
• Approach to and process of interpreting and solving
man’s economic problems based on the values, norms,
laws and institutions found in and derived from the sources
of Islam


ISLAMIC ECONOMICS
• Scarcity and choice
• Conventional economics:
• Unlimited wants
• Limited resources
• Achieving the highest utility

• Islamic economics:
• Economic pursuit must be derived from Islamic worldview
• Economic goals do not contradict the shari’ah
• Shari’ah constraints to be observed in making choices
• Resources are unlimited


SCARCITY IN ISLAM
Islam rejects the concept of scarcity of resources, as it implies imperfection
of nature and Allah. Allah says:
 “It is Allah Who hath created the heavens and the earth and
sendeth down rain from the skies, and with it bringeth out fruits
wherewith to feed you; it is He Who hath made the ships subject to
you, that they may sail through the sea by His command; and the
rivers (also) hath He made subject to you (Ibrahim: 32).
 And He giveth you of all that ye ask for. But if ye count the favours of
Allah, never will ye be able to number them. Verily, man is given up to
injustice and ingratitude (Ibrahim: 34)
 And He has subjected to you, as from Him, all that is in the heavens
and on earth: Behold, in that are Signs indeed for those who reflect (al-
Jathiyah: 13).

 It is We Who have placed you with authority on earth, and provided
you therein with means for the fulfillment of your life: small are the
thanks that ye give! (Al-‘Araf: 10)”.
 In Islam, scarcity exists because of:
 improper use of resources;
 unequal distribution of resources; and
 lack of knowledge

Basic Concepts
Islamic view on Scarcity

Scarcity

Existence Availability

Factors Choice
•Knowledge •Con.
•Effort •Prod.
•Time •Distr.

41

ISLAMIC FINANCE
• To finance the economic activity in an Islamic framework
• Must have institutions using instrument according to rules
and regulations which are all bound by the shari’ah
• Observe basic prohibitions in business transaction: riba, gharar
and maysir
• Products involve must be halal
• Profit must come from trading transactions


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