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Foreword

The economic problems of man are as old as man’s existence on the planet. So is the human effort to resolve them, not only to make both ends meet, but to make life more comfortable and to enhance their power to mould things according to their vision. What to consume? How to produce? How to distribute? These have remained key issues during man’s struggle throughout the millennia of known and not-so-known history. While economic ideas, goals, technologies, policies and arrangements have always been there, however crude or developed and sophisticated they may be, the organized discipline known as ‘Economics’ emerged only around the mid-eighteenth century. The mainstream science of economics grew, by and large, in the context of the postindustrial revolution phase of modern capitalism. The current paradigm of economics has taken shape against this background.

Economic approaches and efforts in the past were inescapably intertwined with the peoples’ moral, religious and cultural perceptions, aspirations and apprehensions. Peoples’ worldview, vision of society and value-framework spelling out the desirable and disdainful played a very important and visible part in the making of their economic decisions. Self-interest, wealth creation, and property relations remained the centre-piece, yet every culture and religio-ethical framework had its own moral ethos – the two major influences on the human mind, as German philosopher Immanuel Kant puts it were: “the starry heavens above and the moral law within”.

The current paradigm of economics, however, has two dominant characteristics. Firstly, economics developed as an integrated discipline, around the nucleus of self-interest, private enterprise, market mechanism and profit motive, making a heroic effort to resolve all economic problems within this self-contained matrix. Secondly, this paradigm virtually delinked economics from all transcendental moorings and the concerns of ethics, religion and moral values. The new approach was out and out secular, this-worldly, positivistic and pragmatic. Normative considerations were either systematically excluded or so marginalized that their relevance became problematic, at least as far as mainstream economics is concerned.

In view of these over-arching influences, economics moved further and further away from its philosophic and ethical roots, and became a network of mechanical relations that were susceptible to tools of quantification and prediction. Efficiency and wealth-creation became the key concepts. Consequently the considerations of equity and well-being, which were an integral part of the decision-making processes in the earlier phases, were down-sized, eclipsed and made almost inconsequential. The present crisis of economics, as also of capitalism, can be traced back to this process. Schumpeter prophetically summed up this down-the-drain movement when he said: “Capitalism creates a rational frame of mind which, having destroyed the moral authority of so many institutions, in the end turns against its own.”

Economics, as it has developed in the context of the capitalistic system, is now one of the formidable social scienes of our times. The last two hundred years have witnessed innovative developments, sharpening of methodologies, greater sophistication with extensive use of mathematical tools of analysis and econometric models of evaluation and prediction. The economic transformation of societies and unprecedented growth in production of goods and services radically changing life-styles of huge populations and regions have played an important role in building the economic power of the developed industrial countries of the world, resulting in their global hegemony. Capitalism and mainstream economics are forces behind the creation of this new world of affluence and power. Socialism and the economics of a planned command economy appeared as a challenge from within the Western civilization, but after a powerful interlude, spread over some seventy years influencing the lives of around half of the world’s population, have receded and collapsed although they are not totally eliminated from the field (China being a case in point).

The capitalist system remains the dominant force, even though its claim to be capable of solving all the problems of mankind through the premium mobile of market mechanism is increasingly questioned. One may not fully agree with all sides of Alexander Solzhenitsyn’s warning (New York Times, 28 November, 1993), yet its relevance as far as the failures of capitalism are concerned are not in dispute. He said: “Although the earthly ideal of socialism-communism has collapsed, the problems it purported to solve remain: the brazen use of social power and the inordinate power of money, which often direct the very course of events. And if the global lesson of the twentieth century does not serve as healing innoculation, then the vast red whirlwind may repeat itself in entirety.” William Wolman and Anne Colamosca capture the current intellectual mood when they conclude their recent study on this note: “Fortunately there are signs that the virtues of unchecked global capitalism are being questioned, and in the most unexpected venues. The need to place limits on global capital was a basic theme at the early 1997 meeting of the august Davos Conference, which brings together economic and political leaders from around the world. Reporting on the thrust of the conference, Thomas Friedman of the New York Times raised the possibility that “the backlash against those who would like to construct the world on a one-dimensional basis, where commerce is everything, where only financial accounting matters,” he writes, “could easily encounter a potential moral blacklash against globalization”. (The Judas Economy: The Triumph of Capital and the Betrayal of Work by William Wolman and Anne Colamosca, Addison-Wesley, New York, 1997, p.221.)

Strands of serious critical rethinking are visible in the writings of leading economists. Notable Laureate Paul Samuelson of MIT laments the disarray into which economic theory has fallen. He warns, “there are no signs that we are converging towards a philosopher’s stone that will cause all the pieces to fall neatly into place”. Professor Otto Eckstein of Harvard says, “we are always one inflation too late in specifying the exact form of the price-forecasting equation”. Robert Heilbroner goes a step further when he says, “Economists are beginning to realise that they have built a rather elaborate edifice on rather insubstantial narrow foundations.” (See “Crisis in Economy or Economics” by Wilfred Beckerman, New Statesman, London, 23 January 1976).

The economic paradigm, which has held sway for the last two centuries, is not only showing cracks, its very theoretical foundations, its underlying assumptions and its capacity to successfully predict future modes of behaviour, are being challenged. Discussion is no longer confined to changes within the paradigm; the current debate is moving more and more towards the need for the change of the paradigm itself. “Challenged”, writes Amitai Etzioni, “is the entrenched utilitarian, rationalistic, individualistic, neo-classical paradigm which is applied not merely to the economy but also, increasingly to the full array of social relations.” (Amitai Etzioni, The Moral Dimension: Towards a New Economics, New York, Macmillan, 1988, p.ix.)

The economic paradigm is being challenged at its very core: the neo-classical paradigm does not merely ignore the moral dimension, it actually opposes its inclusion within the paradigm. The new emerging paradigm, on the other hand, visualizes assigning “a key role for moral values”. Then alone it may be possible, underscores Etzioni, to “seek both what is right and what is pleasurable” (ibid., pp.ix, x). Cristovam Buarque, a well-known Brazilian economist and a former Rector of the University of Brasilia, makes a more dispassionate plea for this new approach to economics in his The End of Economics: Ethics and the Disorder of Progress, translated by Mark Ridd (London, Zed Books, 1993). The failure of economics, in his view, lies in ignoring social and ethical values. “Social objectives”, he says, “have been subordinated and viewed as a consequence of technical progress rather than as the purpose of civilization. Ethical values, meanwhile, have been discarded” (p.xi). What is needed is a fundamental change of approach and a total reordering of priorities. He comes to the conclusion: “Just as physics stumbled upon the need for regulatory ethics the moment it became aware of its catastrophic potential, so Economics sorely needs to rediscover Ethics. The present dilemma will not be dispelled merely by re-evaluating the means and totting up new costs – as one does in project assessment. Rather it is a matter of changing the core objectives of the social process, delivering it from the economistic strait-jacket of the last two centuries ...Without subverting the traditional notion of progress, it will be impossible to grapple with the problem of growing poverty and inequality, and impossible to incorporate ecological balance into social purposes. The issue of economic development thus demands a fresh theoretical approach founded on three pillars: an ethics for redefining the very objectives of civilization; a new definition of the object and field of study, capable of taking in the ecological dimension; and a new rationale for Economics as a discipline (ibid., p.xii). The result of this approach would be that: “Technological options must be determined by an economic rationale subordinate to social objectives formulated by ethical values. The hierarchical order: technical values/economic rationale/social objectives/ethical values, would thus be reversed” (ibid., p.164).

The predicament of economics has also been searchingly examined by a group of leading economists in a valuable study, Economics in the Future: Towards a New Paradigm. The near consensus that emerges in this book is that what is needed to salvage economics from the throes of crisis in which it is caught is not just some new interpretation of this or that economic theory or some changes within the current paradigm of economics, but that the need is to change the paradigm itself and move towards a new paradigm under which economic problems are not studied in isolation but in the context of an entire social system, whose ideals, vision of society and moral values are not hidden, but go to make up the parameters that influence economic decision-making. The modern economy has failed to ensure distributive justice, sustained growth, balanced human development, social harmony and regional equity for a vast majority of mankind and is confronted at home and abroad with the menaces of prolonged recession, persistent unemployment, stagflation, unrestrained monetary expansion, staggering mountains of domestic and foreign debt, and co-existence of extremes of affluence and stark poverty within each country as well as among the community of nations. The link between moral values and economic judgement and behaviour, both at individual as well as governmental levels, which had sustained humanity through the millennia, had been torn asunder during the age of secular capitalistic ascendance and the economists as well as the common man are now trying to re-discover that missing ethical link.

James Robertson, in a very perceptive study, writes: “Unlike both the capitalist and socialist versions of conventional economics, the 21st century economy must be based on recognition that people are moral beings whose freedom as such should not be narrowly bound by impersonal parameters laid down by market and state. The 21st century economy must accept, as an aspect of self-reliance, that people need space in which to exercise moral responsibility and choice in their economic lives. Measures designed to allow this free space to people as individuals, and also to groupings of people in local economies and national economies (especially in the Third World), must be part of the new economic order ... The new economics must thus transcend the materialist assumptions of a conventional economics: that economic life is reducible to production and consumption; that wealth is a kind of product that has to be created before it can be consumed; and that wealth production and wealth consumption are successive stages in a linear process which converts resources into waste. It must reinterpret the manipulative concern of conventional economics with the production and distribution of wealth and the allocation of resources, into a developmental concern with how to enable people to meet their needs, develop themselves, and enhance the resources and qualities of the natural world. It must recognise that because human beings are moral beings the basic questions about economics are moral questions.” (Future Wealth: A New Economics for the 21st Century, Cassell Publications, London, 1990, pp.21–8.)

‘Islamic Economics’ represents a systematic effort by Muslim economists to take a fresh look at the entire economic problem, including the methodology of economics, with a view to coming up with fresh solutions to old and persisting problems. This approach is still in its early phases of growth. We are aware that Muslim economists have a long way to go, but there is no doubt that a beginning has been made in this direction. This beginning bears great promise for the future.

Dr. Umer Chapra is a leading Muslim economist. A Faisal Laureate, his earlier works, particularly, Towards a Just Monetary System and Islam and the Economic Challenge, have established his credentials as a leading intellectual influence in the contemporary Muslim world. Dr. Chapra has blazed a new trail in the present work. The Future of Economics: An Islamic Perspective is a seminal contribution not only to Islamic economic literature, but also to the contemporary economic debate as such. A work of profound scholarship and innovative thinking, it is a powerful yet balanced critique of mainstream economics and makes a forceful plea for taking economics out of its secular and Occident-centred cocoon. He has made a formidable case to re-link economics with moral and egalitarian concerns so as to harness the discipline in the service of humanity. In my view this path-breaking study is characterized, among others, by at least five distinctive features.

Firstly, it is a scholarly and sympathetic critique of mainstream economics, from both the economic as well as moral perspectives. As a professional economist Dr. Chapra is aware of the usefulness as well as the limitations of economics as it has developed in the Western capitalist context. Conscious of the intrinsic value of economic analysis and the contributions it can make towards the amelioration of the human situation on the globe, he identifies the weaknesses that have marred the discipline from playing its rightful role. His approach is not negative, it is positive and creative. He identifies where things have gone wrong and suggests what is needed to set them right. He is not an iconoclast. He is an innovator and a reformer who wants to build on what exists, yet build in a manner that rectifies what has gone wrong. His concern is not confined to the moral and social dimensions, which are crucial to his analysis, but also to strengthen the micro-foundations of economics which need refurbishing to enable them to strengthen the macro-framework and achieve the social objectives.

Secondly, this study makes a systematic effort to bring back the focus of economics onto the question of equity and justice, without weakening the concern for efficiency. The twin objectives of equity and efficiency must go together if economics is to be a science of human well-being and not merely ‘the dismal science of wealth’. Dr. Chapra has done a wonderful job by introducing the concepts of moral filters and by rehabilitating the equity dimension within the matrix of mainstream economics.

Thirdly, Dr. Chapra has meticulously placed Islamic Economics in the landscape of economics. He does not treat Islamic Economics as a separate species. He looks upon the economic problem from an Islamic perspective and as such makes an innovative effort to bring economics in harmony with the Islamic vision and social order. Islam and economics are so intertwined that economics develop a new direction and discover a new world to traverse.

Fourthly, this study makes a brief but succinct and masterly presentation of the state of art of Islamic Economics. Not a survey in the technical sense, it does present an incisive review of major contributions to economics made from an Islamic perspective by Islamic economists during the last century. Although the focus is more on monetary and fiscal aspects, yet Dr. Chapra successfully brings out the flavour of Islamic economic thinking and has identified some of the major avenues it has tried to explore. He is fully conscious of the gaps and challenges, but he very objectively illumines major landmarks in this field.

Finally, this is the first time that an Islamic economist has critically looked into Muslim economic history with a view to throwing light on what has gone wrong with our own history and how real resurgence and sustained socio-economic development can be achieved in the future. He is not satisfied with merely painting a pen-picture of Islamic ideals, values and principles. Drawing upon Ibn Khaldūn he analyzes the causes of economic and political decay and decline, with a view to delineating the path to recovery and reconstruction. This is an original contribution made with great insight, clarity and courage. One may disagree with a point here or a surmise there, but I have no reservation in saying that Dr. Chapra has broken fresh ground in this difficult area. I am confident his analysis and prescription will go a long way in inspiring, even provoking, others to follow the trail and come up with fresh approaches to understand the past and plan the future. This blend of economics and history, especially from an Islamic perspective, is a seminal contribution to our literature. Dr. Chapra’s work also represents an effort to marry idealism with realism, a quality one finds rarely actualized in contemporary writings.

Dr. Chapra is rightly concerned about the future of economics, as much as he is about the future of the Muslim ummah. The message of the book is that while economics needs moral enrichment from an Islamic perspective so as to make it really useful for mankind in its search for a just world order, the Muslim ummah also needs to become more serious about economics’ history, and its own deficiencies if it wants to inaugurate a new chapter in its life. All of us must be prepared to face hard facts and try to get rid of wishful thinking and simple platitudes. I hope this voice of sanity will not go unheeded.

Islamabad	Khurshid Ahmad
29 Dhū al-Qaʿdah 1420
6 March 2000