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Selasa, 06 April 2010

Islam and Mammon: The Economic Predicaments of Islamism

Timur Kuran, 2004\, Princeton, NJ: Princeton University Press, 194 pages, index, $28.00.

Although Bernard Lewis is a deeper scholar of Islamic history, and the late Charles Issawi was a greater scholar of the economic history of Muslim societies, Timur Kuran has emerged in the last decade and a half as the leading scholar in the world of the rising field of Islamic economics. While most who study this field are advocates of Islamic economics as a superior system for Muslim societies, and possibly for all societies, Kuran has been a consistent critic. This volume gathers six of his papers published on the subject between 1989 and 1997 together, along with an updating preface. Although they have been edited to some degree, Kuran himself argues in his preface (p. xvii) that, “Looking back at the essays grouped in this book, I am struck by how well they have stood the test of time.” By and large this is a correct assessment, and his critical stance now is heightened in the wake of the events of 9/11/01 and its aftermath. The clear theme unifying these essays is that Islamic economics as such is not a genuine answer to the world’s economic problems, but an “invented tradition” that serves as an adjunct to the broader, anti-Western, Islamist (or Islamic fundamentalist) political-religious movement.
The six main chapters are as follows: “The Economic Impact of Islamic Fundamentalism,” which initially appeared in a very important 1993 volume edited by Marty and Appleby on fundamentalist movements more generally; “Islamic Economics and the Islamic Subeconomy,” from the Journal of Economic Perspectives in 1995; “Islamism and Economics: Policy Prescriptions for a Free Society,” from International Review of Comparative Public Policy in 1997; “The Genesis of Islamic Economics: A Chapter in the Politics of Muslim Identity,” from Social Research in 1997; “On the Notion of Economic Justice in Contemporary Islamic Thought,” from International Journal of Middle East Studies from 1989; and “Islam and Underdevelopment,” from the Journal of Institutional and Theoretical Economics in 1997.
One problem with this group of essays is that there is a fair amount of repetition, especially about the core concepts of Islamic economics. Thus several essays recount the principles of Islamic banking and the peculiar history of that institution in practice. The sacred book of Islam, the Qur’an, forbids riba, generally translated and interpreted as meaning “interest.” Hence, the forbidding of interest is probably the most widely known and distinctive demand of most Islamic economists. However, Kuran notes that riba originally referred to a practice of doubling a debt (and its accumulated interest) if it is not paid on time, a practice that led to slavery in the time of the Prophet Muhammed, a practicing merchant. Thus, some Islamic scholars and economists deny that interest in general is forbidden but only excessive interest (or usury), but theirs is a minority view. Despite this, Kuran notes that in practice for centuries in Muslim countries there were few restrictions on interest. The current self-styled “Islamic banks,” now operating in over 60 countries, arose in the last half of the 20th century, especially after the rise of oil prices in the 1970s allowed the Saudis to establish the Islamic Development Bank and to provide funds to encourage their spread. They have become the only allowed forms of banking in a few countries, such as Iran and Pakistan.
Kuran recounts their failure to conform to the ideals set forth by the official Islamic economists. In principle, Islamic finance should involve the sharing of profits and losses. In their early days many such banks attempted to follow this. However, they tended to encounter serious losses due to asymmetric information as debtors engaged in understating profits. Hence, these Islamic banks have moved to the use of financial instruments that resemble interest in all but name, while technically conforming to the requirement of not paying interest, such as briefly buying the assets of a borrower and then selling them back at a higher price. Kuran quotes a Malaysian observer of Islamic banking as saying (p. 55): “The only difference is whether the man behind the counter is wearing a religious hat or a bow tie.”
Likewise, there are repeated discussions of zakat, the principle of charity, which is described in considerable detail in the Qur’an, with specific percentages of wealth in various forms that should be paid for distribution to the poor. Several countries have instituted state systems of zakat as well, including Pakistan, Saudi Arabia, and several others. Kuran reports that these systems have been marked by corruption, mismanagement, and have resulted in little alleviation of poverty anywhere they have been instituted. While modern Islamic economists hark back to a “golden age” of the early days of Islam, Kuran argues that there is little evidence that even then did the zakat system successfully redistribute much income to the poor.
Of course each of the discussions of these issues in the respective chapters emphasizes different aspects. Given their centrality to the discussion, and the unfamiliarity that most readers have with them, the repetitious elements are not all that harmful.
Another relatively minor criticism I have is that there is probably an insufficient amount of attention paid to the case of Iran. It was the first full-blown Islamist state that had a theocratic government, and has gone further than any other (with the brief exception of the Taliban regime in Afghanistan) to completely Islamicize itself. Kuran tends to focus more on Pakistan, the nation where Islamic economics first emerged, and Turkey, home of the Ottoman Empire, the last truly powerful Muslim state. An argument for this focus, aside from the intrinsic interest of those nations, is that Iran is a predominantly Shi’a nation, the minority group of Islam, in contrast to Pakistan, Turkey, and also Saudi Arabia, which are of the majority Sunni orientation. Thus, Iran has a number of peculiarities that other Muslim countries do not have, including a much more entrenched clerical hierarchy and tradition of their direct involvement in governance. It must be also noted that Kuran does not ignore Iran, and there is a fair amount of discussion of aspects of its regime, society, and economics.
Arguably the most important of the chapters is the fourth on the genesis of Islamic economics, where the theme of its emergence as part of a broader Islamic identity movement is developed. Kuran notes that Islamic economics was largely the invention of one man, Sayyid Abul-Ala Mawdudi of Pakistan, whose 1947 book (originally in Urdu) The Economic Problem of Man and its Islamic Solution, is the origin of the doctrine. Although he soon had followers elsewhere, Pakistan long remained the center of development of the idea and even today a disproportionate number of Islamic economists are of Pakistani origin. Kuran notes that Mawdudi was the founder of a political party urging the adoption of a strong Islamic identity by Muslims in British-ruled India against the feared encroachments by the majority Hindus as independence approached. Curiously he initially opposed the creation of the Pakistani state, and said this cultural identity assertion should occur within a unified political entity. Of course, once Pakistan appeared, then he argued that it should become a fully Islamic state. He saw Islamic economics as being important because in the industrialized modern world economy, economics was becoming a more important part of life. He was also aware of the influence of British economic thought on many of his countrymen, and sought a resolution to the dualism in their minds, a new synthesis. He introduced the theme of a romanticized nostalgia for the reputed golden age of early Islam, where supposedly Islamic economics was truly practiced, even as he attempted to propose its adoption in a modern economic and social context as the solution to “the economic problem of man.”
It is in connection with this discussion that Kuran links Islamic economics to the broader issue of Samuel Huntington’s “clash of civilizations” thesis (1996). While recognizing its controversial nature, Kuran clearly is sympathetic to it. He notes that certainly this was the mentality of Mawdudi and his followers, although they viewed themselves as defending their culture and society from aggression and pressure from the West as well as from Hinduism. While Kuran mostly is critical of Islamism, noting its failures in practice and its numerous contradictions in theory (such as unresolved issues over state intervention), he does recognize that it has had some legitimate complaints in some parts of the world, especially against undemocratic and corrupt regimes.
Something a bit surprising in connection with this is that Kuran does not pursue this point to emphasize the much broader pattern of fundamentalist movements and their similarities, aside from a brief reference to the “protectionist, antimarket streak” of “Christian economics” (p. 72; see Iannacone, 1993). Rosser and Rosser (1996) have identified this broader movement as the new traditionalism, movements that seek to re-embed modern, technologically advanced economies into traditional religious systems. While the Islamic economics movement is the most prominent and influential (and highly developed) such movement, it is hardly the only one. Even in Mawdudi’s time, Gandhi was developing a distinctive economics in India that is now admired by modern Hindu nationalist economists to some degree (Dasgupta, 1996). Movements of Buddhist economics and orthodox Judaic economics, as well as the above-mentioned Christian economics and others, are all of considerable influence in various parts of the word today. An excellent book summarizing and discussing these and some others is the Marty and Appleby (1993) volume in which Kuran’s first chapter initially appeared.
Another topic of considerable controversy Kuran deals with is the relation of Islam and economic development in his final chapter. He notes that some say there is no relation and some even argue that at least during certain periods Islam aided economic development. However, he agrees with those who see it is having served as a mostly negative force in more recent centuries, despite criticism of such arguments as being imperialist “orientalism” (Said, 1978). Among its problems are traditions that did not allow the rise of juridical corporations or banks, mostly associated with communalistic tendencies in the religion. Another serious problem has been a tendency to oppose innovation that he sees as associated with an ossification of the religion. A possible source of that might be the “closing of the gate of ijtihad” (interpretation) in the tenth century, an ending of allowing interpretations of Islamic law. The deeper issue regarding that is how and why this particular event came about, which probably was important, although it would seem to have coincided with a general decline of the political and economic power of the Abbasid caliphate based in Baghdad. Arguably these were intertwined phenomena, although the Ottoman Empire would later provide a second chance for Islamic military and political power that surpassed Europe’s for a time.
More broadly, Kuran seems pessimistic about what is likely to transpire in the Muslim world. He sees Islamism, and Islamic economics, as spreading, not declining, for some time to come as an identity movement reacting against the power of the West. He suggests that many in the more Islamist parts of the Muslim world, such as Iran and Pakistan, already recognize that Islamic economics does not really work as advertised, but engage in preference falsification (Kuran, 1995) out of fear of the power of entrenched Islamist political leaders. The rebellions of youth in Iran against the Islamist regime are the straw in the wind of eventual greater disillusionment.
However, he notes that there are now entrenched intellectual establishments supporting the development of Islamic economics, much of this originally funded by Saudi oil money starting in the 1970s. He suggests that failures of Islamic regimes will lead them to try harder and harder to achieve hopeless utopias. “The discipline of Islamic economics could feed on itself for decades, mistaking apologetics for serious reflection and cosmetics for genuine reform. The twenty-first century could thus become for Islam what the twentieth was for socialism: a period of infinite hope and promise, followed by disappointment, repression, disillusionment, and despair” (p. 36). Unfortunately, this dispiriting conclusion appears all too likely. For all its peculiarities and limits, Kuran’s book makes this case all too clearly and eloquently.

Dasgupta, A.K. 1996. Gandhi’s Economic Thought. London: Routledge.

Huntington, S.P. 1996. The Clash of Civilizations and the Remaking of World Order. New York: Simon and Schuster.

Iannacone. L.R. 1993. Heirs to the protestant ethic? The economics of American fundamentalism, In: M.E. Marty and R.S. Appleby, R.S. (Eds.), Fundamentalisms and the State: Remaking Polities, Economies, and Militance. Chicago: University of Chicago Press pp. 342-366.

Kuran, T. 1995. Private Truths, Public Lies: The Social Consequences of Preference Falsification. Cambridge: Harvard University Press.

Marty, M.E. and Appleby, R.S. (Eds.). 1993. Fundamentalisms and the State: Remaking Polities, Economics, and Militance. Chicago: University of Chicago Press.

Mawdudi, S.A-A. 1947 in Urdu/translated in English 1975. The Economic Problem of Man and Its Islamic Solution. Lahore: Islamic Publications.

Rosser, J.B., Jr. and Rosser, M.V. 1996. Comparative Economics in a Transforming World Economy. Chicago: Irwin. (2nd edition, 2004. Cambridge: MIT Press).

Said, E.W. 1978. Orientalism. New York: Pantheon.

J. Barkley Rosser, Jr.
James Madison University

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