Islamic Economics – Neither Capitalism or Socialism

QUESTION: Islamic Economics – Neither Capitalism or Socialism

ANSWER:

Muslims attempt to distinguish their approach to economics from both capitalism and socialism, alleging that their view is a mediating approach. Naqvi defines socialism as centered in the abolition of private property (which was Karl Marx’s definition in The Communist Manifesto).¹ In turn, Naqvi defines capitalism as the unlimited freedom of private property with near absolute rights, insisting that as such it divorces ethics from economics. While Naqvi acknowledges that modern capitalism may derive from Protestant ethics, he insists that capitalism is a “dedicated and unlimited pursuit of wealth through unremitting industry, rigid limitations of expenditures on personal consumption or charity, concentration of time and attention on the pursuit of one’s business affairs, avoidance of distraction through intimate friendship with others, systematic and pitiless exploitation of labor and strict observance of honesty in one’s relations with others within the limits set by “formal legality.”²

Strangely, Naqvi here quotes a former Socialist (Heilbroner) and approves of his skewed description of capitalism. Of course, a fair definition of capitalism would have been the free and peaceful exchange of goods and services without theft and fraud, but such a definition would not have served Naqvi’s purpose of painting capitalism in such negative tones. In reality, Naqvi is here portraying not capitalism but libertarianism: “Obviously, free markets run by self-interest-maximizing economic agents, who may otherwise be productively efficient, fail in many important cases to maximize social welfare.”³

Islamic Economics – View of Private Property
Nevertheless, Naqvi contends that Islamic economics rejects socialism’s negation of private property, but also rejects capitalism’s alleged absolute view of private property. “Within the framework of a set of ground rules, individual (economic) freedom should be guaranteed, but the state should be allowed to regulate it in cases where the exercise of individual freedom becomes inconsistent with social welfare.”⁴ Naqvi also insists that, “As to the ownership of private property, especially of land ownership, it has been restricted in various ways. For instance, individuals cannot own uncultivated lands, forests, grazing grounds, mines, etc. All these must be owned by the public authority for public welfare.”⁵

Elsewhere he summarizes the Islamic view of property, noting that “Islam recognizes private property rights when acquired through one’s own labor, but it has reservation with respect to the right of an individual to hold that which is not due to his labor and, with respect to landed property, which he does not cultivate himself. According to an influential view, work is the sole basis of private property holding, and that the fact of cultivation is the only justification for the private ownership of land, which as a rule should be in public ownership. One implication of this principle is that private holdings of land not being self-cultivated are not allowed in Islam.”⁶

To insure that all facets of Islamic economics are carried out according to Islamic principles, “the state will have to play a very important role in the Islamic economy,”⁷ not merely in terms of instituting justice in economic dealings, but even meddling in the ways and means of production, distribution, and risk.

Notes:

Rendered with permission from the book,Understanding the Times: The Collision of Today’s Competing Worldviews(Rev. 2^nd ed), David Noebel, Summit Press, 2006. Compliments of John Stonestreet, David Noebel, and the Christian Worldview Ministry at Summit Ministries. All rights reserved in the original.

¹ Karl Marx and Frederick Engels, Collected Works, 40 vols. (New York, NY: International Publishers, 1976), 6:498.
² Syed Nawab Haider Naqvi, Islam, Economics, and Society (London, UK: Kegan Paul International, 1994), 77.
³ Ibid., 64.
⁴ Ibid., 55.
⁵ Ibid., 91.
⁶ Ibid., 100–1.
⁷ Ibid., 106.