Economics and Business

Islam & Mammon: The Economic Predicaments of Islamism

Timur Kuran, Princeton and Oxford: Princeton University Press, 2004. 194 pages.

In this brilliant contribution, Timur Kuran weaves six chapters into a sound critique of the assumptions and practices of Islamic economics. In essence, he attacks the very foundation of Islamic economics, the prohibition of interest, and then extends his critique to whether Islam’s traditional redistributive instruments in achieving contemporary economic goal is feasible. The author’s intention is not simply to critique Islamic economics, but to bring the ideas espoused by the discipline into the realm of  mainstream social sciences and encourage serious scholarly consideration. The first two chapters summarize the basic tenets of Islamic economics while grounding the discipline in two central claims: that existing economic systems have failed and that Islamic history proves the Islamic system’s superiority over others. Kuran dismisses the latter by revealing that modern economic problems had historical counterparts, that many concepts and methods utilized by Islamic economists originated outside the Islamic world, and that applying ancient solutions to present problems is an inadequate approach.

Islamic economics’ material expression has been confined to Islamic banking, for which prohibiting interest is the sine qua non, and redistribution efforts. Profit and loss sharing techniques, namely, mudarabah and musharakah, have been derived from classical Islamic jurisprudence in order to avoid interest. These terms refer to practices whereby an individual entrusts an entrepreneur or an investor with an amount of capital that will yield a specified return. Kuran attacks these practices, asserting that they remain mechanisms for charging interest on the grounds that since modern banking is based on profit and loss sharing, these classical methods simply allow bankers to avoid using the term interest.

Turning his attention to redistribution, Kuran presents zakat (obligatory charity) as the major mechanism for redistributing wealth. This is criticized on the basis that it does not address modern economic problems in a useful way and that it has not alleviated poverty where it has been implemented. In chapter 2, the author expands this critique by arguing that the Qu’ran does not necessarily forbid interest, but instead forbids riba, the pre-Islamic practice of doubling the debt of a borrower unable to make scheduled restitution. Kuran supports his argument with reference to various debates between Islamic scholars over riba and the prohibition of interest, concluding  that the prohibition is far more complex than the arguments presented by Muslim economists.

Chapters 3 and 4 concentrate on the social aspects of Islamic economics. Kuran discusses Islamic economics and its relationship with Islamist political identity from both a contemporary and a historical perspective. In Chapter 3, he proposes policy responses to counteract the Islamists’ gains in the economic arena. Later, he focuses on Islamist writings concerning the relationship between economics and political identity, particularly in India, where the theory of Islamic economics was first developed. Drawing on the work of Sayyid Abul-Ala Mawdudi (1903-79), he locates the discipline’s  emergence within a period marked by the Muslims’ preoccupation with self-identification. This concern with self-identity gave rise to an economic ideal that stressed the “Islamization” of Muslim economic life.

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