Inaugural Address on Monetary & Fiscal Economics of Islam

Respected delegates, and Respected audience,

A ssalam-o-A laikum

I regard it a great honour to inaugurate this International Seminar on Monetary and Fiscal Economics of Islam. I am particularly happy to note that great Muslim economists, bankers and experts in finance from the world over are participating in this Seminar. To address such a gathering is certainly a singular honour for which I am grateful to the organizers of the Seminar.

It is a matter of great satisfaction for me to review the last three- and-a-half years during which Pakistan had the honour of hosting several international gatherings which aimed at the promotion of unity among the Islamic world and for the enforcement of Islamic System. I regard this as a tribute to Pakistan from the Muslim World for the humble efforts which Pakistan is making toward the enforcement of Islam. I consider this grand Seminar to be one in the series and I would like to thank King Abdul Aziz University for its decision to hold this Seminar at Islamabad in collaboration with the Government of Pakistan.

You have already listened to two speeches before me. In the first speech Mr. Ghulam Ishaq Khan, an economic expert, threw light on important aspects of the subject and in the second speech Dr. Abdullah Omer Naseef enlightened the audience with his ideas. Both these experts occupy unique position in their fields of specialization, and their speeches were excellent examples of their professional maturity. I do not claim to be an expert of monetary or fiscal economics. I am a simple Muslim whose only asset is sincere commitment to Islam and heartful desire for the enforcement of Islam. In this context I would like to present before this gathering some thoughts. I hope that you would not only consider the problems raised by me but also look for solutions to them.

Since inception, man has lived with his wants and has managed to satisfy these somehow or the other. In the early stage of human history human efforts revolved around his material needs alone which he fulfilled without considering whether it was fair or foul. Fulfilment of personal desires was the greatest aim of his life and in order to achieve this aim he utilized his physical and mental capabilities in every possible manner.

When human efforts revolve around self-interest alone, the inevitable outcome is usurpation of the rights of the other people and gradually “might is right” becomes the guiding principle of the society, resulting in various complications of which we are all aware.

Man has entered the present era of civilization after a long journey spread over centuries and he prides himself in being developed, enlightened and civilized. He believes he has replaced his savage values of the dark ages with good and civilized ones. I would invite intellectuals and experts to ponder over the affairs of the world at the beginning of the 15th century Hijra and the tail end of the 20th century A.D. and assess whether human civilization has really progressed or we are still clinging to the values of the dark ages in one form or another. Is it not true that even today man directs all his efforts at the development of his self or his country? Is it not true that every country and every nation is striving for its own economic progress irrespective of the rights of others and even if it hurts the rights of others? I think that even today the developed countries are clinging to those values which we attribute to the primordial age. If there is any truth in this approach, then we shall have to consider whether we shall continue to maintain this old tradition of cruelty and injustice or we want to lay the foundation of better future for mankind. If we decide in favour of better and brighter future for mankind then we shall have to change the present inter national economic and monetary system.

It is not possible to cover all the economic and monetary systems which have been tried in this world so far. Therefore, I want to invite your attention to the two economic systems which are practised in most countries of the world today. One is known as capitalism and the other as socialism. The point to ponder is whether mankind has been able to attain economic emancipation by adopting one or the other of these two systems or have these systems made the mankind more miserable. I personally feel that these systems have added to human miseries, instead of resolving them. For instance, capitalism provides for human freedom but it concentrates the resources of sustenance in a few hands. We have observed that those who control economic resources dominate in all walks of life. These privileged few utilize the capabilities and efforts of others but reap the rich harvest for themselves allowing only a tiny share for the workers.

On the one hand there is socialism which deprives man of his personal freedom under false pretext of meeting his basic needs. In this system the position of the working class is like an animal exhausting his whole life for the fulfilment of its material needs. In this system the needs of the working class are satisfied only to the extent that its body should have the strength to continue work the next day. I am not criticising any particular government but I am only commenting on the philosophy of life which in the beginning of this century had promised a new direction of economic emancipation. But, practically this new direction was not different from a new illusion.

A comparison of these two economic systems brings to light that while in one system there is freedom but no sustenance, while the other provides sustenance but no freedom. In my opinion mankind needs a system in which man is not deprived of freedom for the sake of sustenance and vice versa. It is my firm belief that such justice is guaranteed by Islam alone.

It is a matter of great pride for us that a period of Islamic renaissance has ushered in our lifetime and there is a new commitment for translating Islamic values into practice. This augurs well and we should sincerely endeavour not only to further strengthen this trend but also to benefit from it fully so that we can move forward collectively towards our destination.

Notwithstanding this favourable environment, we should not forget the bitter fact that Islam cannot be enforced merely by speeches and slogans. Islam cannot be popularized through mass media alone. Islam cannot be enforced from the pulpit or from the platforms of inter national seminars. Although these efforts are very useful and desirable, yet I firmly believe that unless you discover appropriate means of satisfying economic needs of mankind the enforcement of Islam cannot proceed satisfactorily. The fact is that in this age the thinking of man is dominated by his material needs. Under these circumstances, any system of life which ignores economic and material needs of man cannot deliver the goods. Therefore, I request this august gathering of experts in Islamic Economics and Finance that they should concentrate on utilizing this new wave of Islamic renaissance with a view to giving a practical shape to Islamic Economic System. I am afraid that our efforts in other directions would not succeed unless we find solution to this problem.

After elucidating on this basic issue, I would like to identify a few more aspects of the problem. I admit that man has made great strides in the field of economic development. The present-day world enjoys unprecedented abundance of resources and wealth. Industrial, technological and electronic revolution have reached their zenith. And now computer has left behind all the past record of progress and victories. It is the result of human innovation of which we can be rightly proud. But a moot point worth consideration is that despite all this material progress and prosperity, the world could not be relieved of poverty. Even today, according to the statistics provided by international bodies, 40 per cent of world’s population is living below the poverty line. On the one hand, man has reached the moon but, on the other hand, he is deprived of clean drinking water. On the one hand, there are palaces and mansions but on the other, millions of men continue to be without shelter. On the one hand, grand hospitals, clinics and medical institutions have sprung up but on the other millions are deprived of basic treatment. Similarly, despite the presence of gigantic universities and education institutions, the low literacy levels persist.

These contradictions show that although man has made progress, the fruits of this progress have not been available to him. The real objective is not only to make progress but also to ensure equitable distribution of the fruits of development. In my opinion the basic requirement of a good economic system is that it should not only provide man to progress in accordance with its capabilities but also allow other human beings to benefit from this progress. This is not only my belief but also the essence of experience that such a just system can only be provided by Islam. The discrimination between man and man to which I have just referred also exists among nations. You know it better than I do that as the curve of economic progress rises, the economic gap between the developed and the developing countries continues to widen. Sometime back this gap was understandable since many countries were under the yoke of slavery resulting in the exploitation of their resources by imperial powers for their own progress and prosperity. Although most of the countries from amongst the developing countries have attained political freedom, yet the economic system of imperialistic era continues to be in force. In fact, in certain regions it is becoming more and more pronounced. I am sorry to say that developed countries only offer lip service for the underdeveloped nations but do not allow them equal opportunities for participating in the ruits of progress. It appears that those countries which were earlier suffering under the yoke of imperialism have now been tied in the chains of neo-economic imperialism. It is necessary to break loose these chains at the earliest. Otherwise, I am afraid, that the consequences of economic imperialism will be much more disastrous than political imperialism.

Ladies and Gentlemen: The shortcomings of the present economic systems to which I have referred to so far are primarily three, i.e.

  1. There is a conflict between personal freedom and sources of sustenance as a result of which man has to sacrifice one for the other;
  2. The fruits of human evolution and progress are not distributed equitably among mankind; and
  3. The present world economic order provides protection to the privileged class and exploits the under-privileged.

While referring to these weaknesses I have repeatedly said that the solution to the problem lies in adopting the Islamic Economic and Financial System. The question is: What is Islamic Economic System and what are its basic characteristics? On this issue several scholars and economists have expressed their views. This morning Mr. Ghulam Ishaq Khan has also highlighted some aspects.

As far as I think, and you would agree with me, the basic characteristics of Islamic Economic System are three:

  1. According to Islamic teachings, Allah Almighty is the sovereign of entire universe and man is the custodian rather than the owner of its resources. This concept of ownership distinguishes Islam from capitalism and socialism in which the resources belong to the individual or the state.
  2. The second basic principle of Islam is that its Economic Order is based on ‘Ad! (Justice) and Ehsan (Obligation).
  3. Islam has established a structure ofiZakah, Khairat and Sadaqat to discourage the concentration of wealth so that the surplus wealth of the rich may trickle down to the needy. You would recall the Quranic verses in which the Holy Prophet (peace be upon him) was asked to tell his followers that they should spend on the needy whatever is surplus. This means that Islam stresses to give away rather than to accumulate.

These basic principles should be kept in mind while designing the economic system in a Muslim country and it should be ensured that we do not digress from the spirit behind these principles while working out the details of such a system.

Here I want to raise the question that if the economic system proposed by Islam is so good, why has it not been implemented in its entirety in any part of the world. Is it because the Muslims were not able to pay any attention to this during their subjugation? I believe that we should not blame others for our shortcomings because but for a few hundred years of subjugation, Muslims have been free and in power for a very long time. Several years have passed since the independence of many Muslim States but in spite of that we do not find any practical demonstration of Islamic Economic System during the current times or the recent past which can be adopted as a model. Why is it so? I feel that we have the guiding principles of Islam. We fully believe in them. We know that by following these principles we can solve our economic problems but where we get stuck is the procedural aspect and the action plan for the implementation of these principles, and it is in this field that the services of economic and financial experts like you are needed. You can be the torch bearers in this field. Not only I but the entire world of Islam has great hopes in you. I do not want to build high hopes, but I do sincerely hope that if you really succeeded in establishing the economic order of Islam. Then the time is not far away when the non-Muslim nations will also follow us. It is my observation that man turns to where he finds his betterment. If he adopted capitalism or socialism in the past, he would certainly turn to a better alternative when it becomes available. If Islam can be made to actually demonstrate what we claim, then there is no reason why the Islamic Economic System should not become the most popular system in future.

Respected participants, I would have liked to mention the efforts which are being made in Pakistan for the introduction of Islamic Economic System, but this subject has already been covered by Mr. Ghulam Ishaq Khan and I do not wish to take your time by repeating it. I would, however, like to express the deep awareness among the Pakistani people and the leaders, intellectuals, economists, businessmen and traders that our welfare lies only in adopting Islamic principles. In order to translate this collective will into practice, we are attempting to enforce Islamic values in all walks of life, including the systems of education and justice and the socio-economic structure. We are simultaneously proceeding on all fronts because we believe that the different sectors of the society are linked to each other and it is not possible to enforce Islam in one sector to the exclusion of others. We believe that the Islamic financial and fiscal systems can succeed only if Islamic values are enforced in other sectors as well.

Learned experts, I want to conclude my speech by posing a few questions. I want that we should create an environment conducive to practical advancement towards the resurgence of Islam and enforcement of Islam so that we can practise Islam in our individual and collective lives, and set a good example for other nations of the world instead of depending on them. The questions are:

  1. Is it possible to get rid of the present exploitative world economic order?
  2. Can two or more economic systems coexist without conflict?
  3. Is it possible to have the same Islamic Economic System in all the Muslim countries?
  4. Do we have an alternate system in Islam to replace the present economic and financial order? If not, how soon one can develop it?
  5. Do we have all the details of an economic system based on 'Ac/I and Ehsanl If not, how can they be evolved?
  6. According to the Quranic injunctions, interest is forbidden. But is interest the only form of exploitation the elimination of which would solve all our problems?
  7. In the new economic system how best can we banish poverty. What effective role can the system of Zakah play in this behalf?

I hope that the experts who have come from different parts of the world would search for answers to these questions in this Seminar and by the end of the Seminar would prepare an action plan which would help us in implementing the true Islamic Economic Order.

With these words I declare this Seminar open and pray to Allah for your complete success in this noble endeavour. May Allah give you the strength to fulfil the expectations which the Muslims of the world have in you in this new Hijra century.

Long live Pakistan.

Long live the unity of the Muslim World.


Source: Fiscal Policy and Resource Allocation in Islam, Ziauddin Ahmed, Munawar Iqbal and M. Fahim Khan. Republished with permission.
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