Islam and labor law: Some precepts and examples

University of Birmingham: Religions and Development …, 2008

A central thesis of this paper is that social science is the study of human experience, and hence is strongly conditioned by history. Modern Western political, economic and social structures have emerged as a consequence of the repudiation of religion associated with the Enlightenment and are based on secular principles. Many of these are inimical to Islamic principles, and cannot be adapted to an Islamic society. Muslim societies achieved freedom from colonial rule in the first half of the twentieth century and have sought to construct institutions in conformity with Islam. The development of Islamic economics is part of this process of transition away from Western colonial institutions. This paper is a survey of the literature on Islamic economics, which focuses on the contrasts between Western economic theories and Islamic approaches to the organization of economic affairs. Neoclassical theory is centred around the acquisitive instinct of humans and makes competition the driving force of economic analysis. Islamic approaches foster cooperation and encourage generosity as the fundamental principle for handling economic affairs. Human beings have potential for good and evil, and are free to choose between the two; their behaviour is not subject to the mathematical laws postulated by neoclassical economic theory. The main message of Islam is that we must strive to achieve the potential for good at both the individual and social levels. Behaviour in the economic realm is also governed by this goal. Islamic law (Shari’ah) provides the framework for all activity within an Islamic society. In the economic domain, Islamic law regulates both methods by which money may be earned and also the ways it may be spent. Acquisition of wealth is permissible only in ways that are just to all the parties concerned; exploitation, arbitrary taxation, and individual profit resulting in social harm is not permissible in Islamic law. This puts numerous restrictions on business practices utilized to make a profit. For example, polluting the environment or selling products that lead to moral corruption are not permissible in Islamic law. Wealth that has been acquired becomes private property, which is, according to Islamic concepts, both a trust and a test. The ‘trust’ aspect means that property must be used in ways beneficial to the individual and society. The ‘test’ aspect means that those who have more than they need are required to take care of those who are in need. Ways in which acquired wealth can be spent is also subject to Islamic law. People are expected to strive to be self-sufficient and not ask from others. Thus striving to acquire wealth and spending it on personal and family needs is encouraged. Islam does not preach austerity and encourages a comfortable standard of living. At the same time, it strongly discourages spending on idle desires, luxuries, and ostentation. There is also a strong encouragement to spend what is beyond one’s needs on social welfare. These fundamental principles for acquiring wealth, using property (acquired wealth) and spending it impact on all realms of economic activity. Since these are substantially different from Western ideas in all three areas, there are substantial contrasts between Western economic institutions and Islamic ones. The paper traces out these differences in many realms of economic activity. The primary objective of an Islamic state is to provide justice, and Islamic public finance is concerned with tracing the concrete implications of this abstraction in the economic realm. Western financial institutions have the acquisition and multiplication of wealth as their prime objective. Since acquisition of wealth can only be a means to an end, these institutions require modification in an Islamic society. Similarly, Islamic imperatives for social welfare require construction of certain uniquely Islamic types of institutions that do not have counterparts in the West. The paper discusses these issues in some detail.

A well-regulated economic system requires incentives that reward productive and withhold rewards from unproductive activity. Such incentives are put in place by means of legislation and enforced with the help of regulatory agencies. A well-managed system will allocate resources more efficiently than a system in which income may be gained without active participation in economic activity, by lending at interest in particular, which invariably increases the prices of finished goods without, however, adding any value. Interest-based lending produces a range of important, though rarely highlighted, side effects. They include inefficiency, indebtedness, instability, inflation, unemployment, slow or declining economic growth, and an uneven distribution of wealth. (224 pages)

iefpedia.com

After decades of its birth, Islamic economics has undoubtedly gaining its strength. However, it could not be regarded as yet, inevitably, as being a zero-defect discipline. Although the debate on Islamic economics seems to be almost rather settled, but a revisit to it is still indispensable. This is exactly what this paper intends to do. It attempts to revisit the mainstream Islamic economics and explore two unresolved concerns that are observed to have prevailed in it, so as efforts to overcome them could entail with a more proper development of the discipline. The two unresolved concerns are the untransformed structure of and the remaining of the conventional economics assumptions within the Islamic economics itself. This effort comes with awareness that these two unresolved concerns are not the only unresolved concerns still lingering around the Islamic economics. There are at least five more, viz. an absence of the redefinition of operating concepts, inaccurate ultimate aim, pseudo-Islamic operational mechanisms, erroneous research methodology, and knowledgepractice dichotomy of the Islamic economists themselves. However, due to space limitation, these five unresolved concerns will have to be dealt with elsewhere. The concentration of this paper therefore would only be on the untransformed structure and the remaining of the conventional economics assumptions of the mainstream Islamic economics.

International Journal of Middle East Studies, 1986

Labor in the Islamic Setting: Theory and Practice, 2017

In this paper, we comparatively analyze the views and role of labor in Marxian, mainstream and Islamic economics. We argue that Marxian view of labor undermines the role of entrepreneur. Indeed, the slave trade, industrialization and Colonialism resulted in exploitation of the labor. But, to correct matters, undermining the role of entrepreneur to the extent of abandoning private property rights is not the right solution either as it was also proved in the later part of the twentieth century. Nevertheless, mainstream economics too is unable to create an equitable balance between the capitalists and the labor class, especially in the presence of extractive institutions like interest based earnings on accumulated wealth and incapacitated wealth redistribution mechanisms. These extractive institutions perpetuate the dominance of wealthy capitalists by making their accumulated wealth immune to entrepreneurial risks. This also results in concentration of wealth, increase in income inequality and low levels of capital formation. Indeed, the recent evidence of jobless growth, high youth unemployment despite high per capita income and high income inequality supports this view. In Islamic economic framework, prohibition of interest encourages productive enterprise and capital formation. These factors boost the labor demanded by the firms. In the microeconomic decisions in consumption-leisure choice framework, Islamic institutions positively boost the labor supply. In an Islamic economy, wealth redistribution through Zakat and inheritance laws ensures circulation of wealth. Prohibition of interest closes the door for riskless non-labor income on money capital. This increases the cost of leisure and encourages the person to supply more labor and/or invest money capital in productive enterprise. Finally, we discuss the impact of Islamic work ethics on dealing with the problems of moral hazard, labor shirking and rigidity in the labor market due to efficiency wages and insider-outsider relationships.

Journal of Critical Realism in Socio-Economics, 2023

All science is mirroring a Weltansicht, or worldview-that is, a comprehensive framework through which individuals or cultures interpret and understand the world around them. Worldviews not only provide a broader context for interpreting the data, but also influence research directions, methodological preferences, and final conclusions. Economics is no exception to this phenomenon. This modest essay aims to open up the epistemological foundations of modern economics to closer scrutiny with a view to pinpointing the tacit assumptions, cultural or other biases, and preconceived notions operating beneath the surface of economic theories, models, methods, and approaches. In addition, this essay also explores the controversial idea of Islamic economics which its exponents say recognizes the interdependence between economic outcomes and ethical choices, and take into account the importance of aligning economic activities with universally accepted human values.

CEREM (Central European Review of Economics and Management), vol. 3 no. 4, 2019

Aim: This article takes a critical look at the claims made by advocates of an Islamic economy, in particular that it differs fundamentally from capitalism and socialism because it is built "on a superior ethical basis. The aim is to find out whether this claim can be creditably sustained and why it is made. Design: The world view behind the Islamic economy is probed into by means of a literature study encompassing publications by prominent students of Islam and Islamic economics, predominantly themselves Muslims, which have appeared in a wide range of professional books, magazines and paper series. Conclusions: It is concluded that an Islamic economic system does not differ fundamentally from mixed-economy non-Islamic ones and that there is little reason for non-Muslims to accord Islamic ethics special status. Further, it is found that important drivers of the attempts to Islamize the economy are frustration about the sorrow state of the Islamic world at least since the early nineteenth century and a wish to regain something of its former glory. In other words, identity politics is at play. There may an element of subjectivity in this conclusion, as it depends on interpretations that are hard to prove or disprove conclusively, but statements by leading Muslim advocates of Islam economists give it weight. The conclusion may help to interpret developments in the Muslim world, which is an indispensable step in finding a way to deal with them.

IJPSAT, 2020

This chapter aims at comparing the major Islamic views on economy to previously experienced views such as socialist, fascist and capitalist attitudes. The role of government, interest rates, public and private property rights and regulations, implementation difficulties, market mechanism and financial management, wealth accumulation are the main areas of concern in this paper. This chapter is a short extract taken from the master thesis advised by F.

A written version of a lecture delivered at the Institute of Islamic Economics, International Islamic University, Islamabad, in April 1998. Updates the position stated in an earlier lecture delivered in 1984 at Third International conference on Islamization of Knowledge,Kuala Lumpur, 1984.