The Islamic perception of the socio-economic process is dynamic and its insistence on social justice is uncompromising. To produce the best social structure, according to this view, man’s economic endeavours should be motivated by a meaningful moral philosophy. In the face of the challenges presented by the modern world, the practice of Islamic economics raises many complex and profound issues. These are addressed in this highly important work, which must be considered essential reading for all those who live in the vision of the ‘right’.
First published in 1994.
Foreword by Professor Khurshid Ahmad. Preface. 1. Introduction. Plan of Work. Part 1. Foundational Issues 2. The Nature and Significance of Islamic Economics. A Matter of Definition. Ethics and Economics. The Belief in the Divine Presence. Muslim Society versus the Islamic Society. On Assessing Islamic Economics. Does Islamic Economics Exist? Summary 3. The Ethical Foundations. An Outline of Islamic Ethics. The Ethical Axioms. Unity (Tawhid). Equilibrium (Al Adl wal Ihsan). Free Will (Ikhtiy’ar). Responsibility (Fardh). Summary. Part 2. A Model of Islamic Ethical Axioms 4. The Framing of the Axioms of Islamic Ethics. Religion as a Source of Ethical Axioms. The Characteristics of the System of Ethical Axioms. The ‘Efficiency’ of the Islamic Ethical Axiom System. Towards a Normative Islamic Economics. Summary 5. The Rules of Economic Behaviour in an Islamic Economy. From Axioms to Rules of Economic Behaviour. Rational Behaviour and Ethical Environment. Ethics and Rational Behaviour. The ‘Priority’ of Individual Liberty. Ethics and Consumer Behaviour. Pareto-Optimality as a Social-Choice Rule? Ethics and Distributive Justice. Reducing Income Inequality. Structural Change. Ethics and the Role of the Government. The Problem of Social Choice in an Islamic Economy. Summary 6. A Perspective on Inter-Systemic Comparisons. Islam and Socialism. Islam and Capitalism. Islam and the Welfare-State Doctrine. Summary. Part 3. The Objectives and Policies in an Islamic Economy 7. Setting the Policy Objectives. The Basic Objectives. Individual Freedom. Distributive Justice. Universal Education. Economic Growth. Maximizing Employment Generation. Summary 8. A Taxonomy of Policy Instruments. Some Key Policy Issues. The Institution of Private Property. Growth-Promoting Policies. Social Security System. The Question of Public Ownership. Summary 9. The Problem of Abolishing Interest: 1. A Few Clarifications. An Islamic Perspective on Interest. The Problem of Positive Time Preference. The Marginal Utility (Disutility) of Consumption. (Savings) Over Time. The Depreciation of Capital and New Investment. Introducing Money. Summary 10. The Problem of Abolishing Interest: 2. Can Interest be Abolished by Administrative Fiat? PLS, Equities, and Bonds. The Fixed Rate of Return vs The Variable Rate of Return. From Interest Rates to Profit Shares. The Preference for the Variable-return. Instruments. Is Equity-Financing ‘Separable’ from Debt-Financing? Is Uncertainty per se Desirable? The Ethic of the PLS. Summary 11. Towards a Solution of the Problem of Interest. Regulating the PLS System. Indexing of the Rates of Return on Savings. The Principle of Indexation. Reforming Lending Operations. Summary Part 4. Rainbow’s End 12. From the Ideal to the ‘Reality’. The Challenge of Transition. Financial Reforms in Pakistan. The Pangs of Transition. The ‘Initial Conditions’. Private Property. Voluntary Combinations. Universal Education. Summary 13. Towards a New Social Reality. A Leitmotif. The Mainsprings of Islamic Economic Philosophy. The Consequence-Sensitivity of the Islamic Economic Philosophy. Why an Islamic Economy? The Force of Islamic Morality. The Road to Success. References. Index.