CIVILISATIONAL APPROACH TO ECONOMIC DEVELOPMENT:AN ISLAMIC PERSPECTIVE

byNik Mustapha Hj Nik Hassan

Director-General INSTITUTE OF ISLAMIC UNDERSTANDING

MALAYSIA (IKIM)

CIVILISATIONAL APPROACH TO ECONOMIC DEVELOPMENT

1. INTRODUCTION2. WHAT IS A CIVILISED SOCIETY 3. CIVILISATION IN A SECULAR SOCIETY 4. HIGHLIGHT OF CURRENT WORLD

ECONOMIC SCENARIO 5. WHY THE WORLD IS ON THE VERGE OF

DESTRUCTION?6. APPRECIATING THE ISLAMIC APPROACH7. CONCLUSION

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I. INTRODUCTION Over the past two decades, the global economic

and financial landscape has evolved, transformedand changed drastically. The traditional economicpowerhouses namely the US, and Europe, are nolonger forces to be reckoned with as they used tobe. Such traditional advanced economies havefaced massive public debt, which has causedunprecedented decline in economic growth andthe slowing down of employment creation. In theface of the current severe economic problem, Iwould like to put forth a civilisational approach tohelp mitigate the prevailing situation.

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A civilised society is one whose members, on average,posses a progressive mind and intellect, as well as thecommand of the advanced skills of life and practise nobletraits.

In other words, it is a highly progressive society in terms ofphysical and spiritual. The holistic nature (shumul) ofprogress fulfils the demands and needs of human nature.

The results of achieving such a glorious civilisation arestability and economic progress that can serve both thecountry and nation well.

2. CIVILISATION IN A SECULAR SOCIETY The 21st century currently witnesses a highly

challenging situation to the integrity of the humancivilisation. The progress of a nation is contingent uponthe integrity of civilisation. Civilisation must be based onnatural human values or adhere to the true nature ofhumanity.

The end of the 20th century witnessed how theCommunist bloc in Eastern Europe and the USSRcollapsed after being in power in several states forseven long decades.

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The philosophies of Marx and Hegel had failedto build and form a strong human civilisation –instead their outlook on life (worldview) merelyfocuses on material interests (materialism).1

Economic restructuring approaches based on the collectivism approach2 clearly result in significant failure.

1. The belief that material progress alone is fundamental to the integrity of civilisation.2. The principle of social control and centralised economy to the government.

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The capitalist bloc neither shows a positive example ofcivilisation to the humankind.

An economic system based on Materialism andindividualism3 cannot defend the wealth and economicdevelopment of the country on an ongoing basis.

Not only do they face economic crisis, their whole lifesystem is at the brink of destruction.

3. A State system is one in which individuals are given absolute freedom to determine the course oftheir economy, politics and so on.

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The leading Nobel-recipient American economist, Joseph E. Stiglitz says :“Wehave created a society in which materialism overwhelms moralcommitment, in which the rapid growth that we have achieved is notsustainable environmentally or socially, in which we do not act together toaddress our common needs. Market fundamentalism has eroded any senseof community and has led to rampant exploitation of unwary andunprotected individuals. There has been an erosion of trust and not just inour financial institutions. It is not too late to close these fissures.”*His book, "Freefall", explains his critical view on the increasing economicpredicament and suggests that capitalism is on the brink of destruction.

*See Joseph E. Stiglitz, Moral Bankruptcy, Why are we letting Wall Streetoff so easy? Mother Jones, January/February 2010 Issue,http://www.motherjones.com/politics/2010/01/joseph-stiglitz-wall-street-morals

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3. HIGHLIGHTS OF CURRENT WORLD ECONOMIC SCENARIO Widespread Debt

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Source: http://stconsultant.blogspot.com/2012_01_01_archive.html

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3.1 ASEAN STATISTICAL HIGHLIGHTS

Source: UN Economic and Social Commission for Asia and Pacific (UNESCAP), Statistical Year Book 2013, www.unescap.org/stst/data/syb2013.

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3.1 ASEAN STATISTICAL HIGHLIGHTS

Source: UN Economic and Social Commission for Asia and Pacific (UNESCAP), Statistical Year Book 2013, www.unescap.org/stst/data/syb2013 .

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3.1 ASEAN STATISTICAL HIGHLIGHTS –UNEMPLOYMENT RATE

Source: UN Economic and Social Commission for Asia and Pacific (UNESCAP), Statistical Year Book 2013, www.unescap.org/stst/data/syb2013.

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4. WHY IS THE WORLD ECONOMY ON THE VERGE OF DESTRUCTION?

To understand the cause of the problem, we needto understand the basics philosophicalunderpinnings of each economic system.

The solution to the problem should be referred tothe vulnerability of its root causes rather thanattribute it to its signs/ negative symptoms thatresult from the implementation of such a system.

The secularist ideology has put forth twoapproaches to economic organisation.

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4.1 Capitalist Economics Basic Philosophy

- Materialism (Economic Restructuring Strategy – economic growth)- Individualism (Laissez Faire – ample space for individuals)- Naturalism (government sector involvement is minimised)

Worldview- Human Nature – economic man (Homoeconomicus - purpose of

living is to accumulate wealth for satisfying lust -Hedonism)

– ownership of property is absolute,freedom to accumulate and spendproperty without ethical guidelines.

– human individual (Individual being),live to survive for self-interest (greed).

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4.2 Marxist Economics Basic Philosophy

- Materialism- Collectivism (Structuring of economy based on

"Economic Planning")- Freedom of individuals, marginalised (Working for the

state)

Worldview- Economic factors determine everything in developing a

civilisation.

4.3 An Assessment of Capitalist System Civilisation is underpinned solely by achieving

economic development.

Capitalist development strategy:- Emphasis on achieving economic growth

(GDP)- Emphasis on increasing per capita incomerather than fair distribution of wealth.

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Results of Capitalist system- Individuals become greedy and selfish (widespreadoppression, fraud, abuse of power, corruption andothers)- Individuals spend more than income earned, whichleads to a significant increase in Individual and national debtburden. (hedonism)- Rise of instability and community disharmony (high

cost of living, poverty, unemployment, increasingsocial problems, etc.)- Increased government involvement in the economy torectify social disequilibrium.

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- National Economic Policy Dilemma(Fiscal Stimulus vs. Fiscal Austerity).

- Environmental destruction (sudden cause of hurricanes,massive floods and other natural calamities).

- The collapse of the Family Institution.Statistical example:2001 - Total 2,077,000 marriages in the United

States.Marriage rate: 6.8 per 1,000 populationDivorce rate: 3.4 per 1,000 population

Source: Centres for Disease Control and Prevention.

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Eventually, the society is poised for its own ruin.

Evidently, the prevailing predicament of the worldis the problem of civilisation, rather than economy.Therefore, the solution to it must be holistic(shumul) to meet all the needs of human nature.

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Islam considers the life of man as one andindivisible. It considers the life of anindividual as an inseparable portion of thelife of the society whose individualsrequire and complement each other in theIslamic scheme of social order. Man has tobe an individual and collective entity atthe same time.

5. APPRECIATING THE ISLAMIC APPROACH

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Islam is revealed with a particular definitepurpose. In the words of Shah Waliullah(1702 – 1763), a great Muslim scholar ofthe 18th century, the purpose of Islam isto purify the inner life of man and to makehim realise the Divine Will by creating anorder society wherein man is able todevelop his potentialities to the full.

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Islam insists on the unity of religion andstate. Only then can the Islamic idealsthat exist in principle be carried out inpractice. To enhance the authority ofIslam, the state must pursue social justiceto all, regardless of their religious beliefs.

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The Holy Qur'an has pronounced allmankind as one and compared it to asingle organic entity in which theindividual cannot do without the societyand vice versa. Each is essential to theother. This unitary view provides adynamic direction to all spheres of humanactivities.

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The Qur'an teaches us that man's socialityhas been embedded within his naturaldisposition. It states:"O people! We created you from amale and a female and made you intonations and tribes, so that you mightknow one another. Truly, the dearestamong you to God is the most piousamong you." (al-Hujurat, 49:13)

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The verse explains that man has been created soas to emerge in the form of various national andtribal groupings basically for the sake ofidentifications. Through this assignation tonations and tribes, mutual recognition takesplace, that is, the inseparable condition of sociallife. Allah has also created man in diversity withregard to their physical, spiritual, intellectual andemotional capacities and possibilities. HE hasmade some superior in one way and others inanother, so that all require each other by nature.This implies the basis for the interconnectednessand interdependence of life within society.

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In Tahdhib al-Akhlaq, wa Ta'thir al-A'raq,Abu Ali Ahmed Miskawayh (d. 1030), aMuslim philosopher and historian,expounds the theory that man is social bynature. This means that he needs anorganised and just society where he canperfect his nature. Man has to work andstruggle for this goal.

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Miskawayh believes man can improve inpiety only through mixing with people andsharing their sorrows and pleasures.Virtuous qualities can be developedcollectively and by living in co-operationwith others.

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Al-Farabi (d. 950), another great scholar,believes that in order to preserve himselfand to attain his highest perfections,every human being is by his very naturein need of many things which he cannotwholly provide by himself; he is indeed inneed of people each of whom suppliessome one or other of his particular needs.

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From the Islamic viewpoint, all othercreations are made subservient to man.The sun, stars, moon, earth, clouds, air,plants and all the elements, are createdfor man for this purpose.

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Man is capable of free action to utilise allresources that may achieve individual andcollective perfectness. Towards this end,man has to utilise them properly andeffectively to change the course of eventsand transform creation into the patternAllah has commanded and revealed. Thisis the divine trust (amanah) laid uponman as vicegerent of Allah (khalifah) onearth.

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Man's special position on earthcorresponds to the power of intelligencegranted to him to reason and analyse.Moreover, he receives Guidance fromAllah through Prophetic missions thathave shown him the right path. Thus,man is only Allah's vicegerent on earth inas much as he is at the same time theslave of Allah (al-'abd).

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He rules over the earth not in his ownright, rather as Allah's vicegerent aboveall creatures. He, therefore, bearsresponsibility for the created order beforethe Creator and is the channel of grace forAllah's creatures.

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Islam's unitary view of life as aninterconnected and homogenous wholeclearly contradicts the secularistic viewwhich sees life as an intricate mechanismof distinct fragments.

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The Islamic worldview demands that mancultivate the moral and spiritual strengthgiven to him. The spiritualisation of manaims to realise a development of characterthat is purposive, courageous, just andbenevolent. The success of such a missionwill require the creation of an environmentin which Islam can be implemented in itstotality.

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5.1 Position of Economic Dimension

The economic dimension is accorded aspecial position in the Islamic socialframework. Islam believes that thestability of the whole is contingent uponboth the material and spiritual well-beingof man.

It regards both aspects as integrated in auniting form in every act and requirementof man as opposed to material dominancein the secular system.

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The Islamic concern for both aspects ofhuman existence has dissuaded Muslimsfrom asceticism. Muslims are required tobe active, creative and productive in theireconomic pursuits.

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It has been ceaselessly reiterated from thebeginning of Islam that the most basicprinciple of the Islamic social order is theestablishment of economic justice.

Economic justice implies the realisation ofa number of objectives. Elimination ofabsolute poverty is a prime objective.

Economic opportunities must be madeavailable to every individual to participate.

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Wastage and improper utilisation ofavailable resources are acts of economicinjustice (dzulm). Similarly, an economicinefficiency in identifying, co-ordinatingand utilising resources can contribute toeconomic injustices.

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Economic justice can be ensured in anenvironment where individual decision isconsidered as having the primaryinitiative. Freedom to decide andparticipate in economic endeavours guidedby religious principles is a prerequisite foreconomic justice.

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5.2 A Theoretical Framework Central to the Islamic worldview is man's

relationship with Allah (al-tawhid). Man'srelationship with his fellow men andnature must be in harmony with thevalues as established by Allah.

Tawhid binds all believers together andmakes of them an integral, organic bodysubmitted to the Will of Allah.

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Tawhid in the context of ethics refers tothe integration of the spiritual andtemporal aspects of human existence.Ethics is the core of Islam. The Qur'anrepeatedly uses the phrase:"Those who believe (in God) and do goodwork". (al-Baqarah, 2:25)

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The application of tawhidic principles tothe economic system affirms man's placeas the central subject of economicmanagement. From the Islamic viewpointMan sees nature, with which he uses forhis own needs and that of society, as anecessary material, without which noethical merit or demerit is possible.

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The use of nature by man must be aresponsibility. By responsibility, it meansthat no part of nature be destroyed,degraded, or indeed even used, unlesssuch is conducive to the realisation of thedivine purpose, man's fulfilment of thehighest moral values.

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Such an Islamic approach towards thesystematisation of economic activitywithin the social order not only providesan opportunity for individual and collectiveeconomic advancement, it can also sustainsuch advancement without creating tragichuman disintegration and disorder.

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5.3 Goals Islam, at the same time, is goal-oriented. The guiding principles for the organisation

of economic activities at individual andcollective levels are aimed at achievingcertain economic goals in the light of theoverall objectives of the Islamic socialorder.

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Firstly, to provide and generate ample andequal opportunities for every individual toparticipate in economic activities;

Secondly, to eradicate absolute povertyand fulfil basic needs for all individuals inthe society. Poverty is not only aneconomic disease but also affectsindividual spirituality; and,

Thirdly, to maintain economic stability andgrowth, and upgrade economic well-being.

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5.4 Natural and Structural Arrangement

Since economic justice and co-operationare the spirit of Islamic economy, itsportion of the command of tawhid, thetype of structural arrangement neededmust work towards translating this spiritinto reality and, moreover, be able tomeet needs anywhere and anytime.

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A number of elements can contributetowards such a structural arrangement.They are as follows:

(i) Islam has recognised, from thebeginning, the position of government ineconomic management. In everyorganised society, there must be anauthority to oversee, coordinate theeconomy and provide the direction for it tomove in.

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(ii) The private sector is considered ashaving the primary initiative in theeconomic activities of the society.

(iii) Islam recognises the significance ofinternational trade. Any kind of trade-barriers are discouraged in principle inIslam and should continue to be so.

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5.5 Policy Formulation – The Operationalisation of the System

Siddiqi contributes significantly to thestudy of the governments's approach toareas needing policy formulation. Hedivides the functions of the governmentin general into three categories asfollows:

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(i) Function assigned by shariah on apermanent basis. This category includesall functions specified in the Qur'an andSunnah, directly or indirectly, andaffirmed by the jurists. These functionsrelate to the permanent human situationand not changing social conditions. Forexample, to maintain administrativemachinery, law and order, defence,dissemination of Islam, etc.

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(ii) Functions derived from Shariah on thebasis of interpretation (ijtihad) for thepresent situation. This category includessuch functions as have become necessaryfor the realisation of the objectives ofShariah in view of the social and economicconditions prevalent in our times. Forexample, the monetary supply andallocation, participation in the productionof public goods, etc.

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(iii) Functions assigned to the governmentat any time and place by the peoplethrough the process of consultation(shura).

These guidelines on policy formulation willprovide a clear direction for governmentparticipation in economic matters.

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6. Conclusion The world economic predicament is not an economic issue

alone but also one on human civilisation.

The Islamic approach to the economic system has always beenan approach to human civilisation as a whole. It is highlyrelevant and has a strong case to address the complexeconomies of the present age. The philosophical and ethicalbases of the system reflect the nature of humanity. It refusesto look at economic matters in isolation from the entire needsof man. Instead, it insists on putting them in a properperspective. Islam has a multi-dimensional approach to theunity of the worldly and the sacred, to ethics and economicactivities as well as to individual and collective responsibility.Indeed, both are dynamic, progressive, and intensely relevant.

Muslim countries in ASEAN should transform their economies,using the Islamic model as example for the world communityto follow.

(Wallahu a’lam)