Economics and Business

Economic Development in Islam

All nations irrespective of their ideological leanings strive to achieve for their people a reasonable measure of economic and social well-being consistent with their national aspirations. Muslim countries, in particular, need to do so with a sense of urgency and conviction. After having been systematically eclipsed from the forefront of politico-economic power and glory for centuries, they now find themselves riding the tide of Islamic resurgence in thought, word and action. In this context, it is important to clarify the concept of economic development from an Islamic perspective.

The basic theme of this paper concerns the role, place and meaning of economic development in Islam. It presents a theoretical construct showing how economic development is related to the achievement of welfare in the two stages of human life : the fleeting worldly life and the eternal life of the hereafter, and then the index of economic development.


2. ECONOMIC DEVELOPMENT : A HEURISTIC EXPOSITION

Let me first begin by emphasizing that Islam’s basic concern is human welfare. The Quran and the Sunnah reveal an overriding interest in the overall welfare of mankind , while a unanimous view of the Fuqaha (Muslim jurists) is that the welfare of the people and their relief from hardships is the basic objective of the Shari’ah.  Development of Economic Development should be consistent with this central objective of Shari’ah. Economic development in Islam may be defined as a balanced and sustained improvement in the material and non-material well-being of man, and development as a multi-dimensional process which involves improvement of human welfare through advancement, reorganization and reorientation of entire economic and social systems in accordance with the norms and values of Islam.

In this context, I would like to emphasize the concept of two-stage permanent life of human beings. The life of mankind consists of two sequential stages: the worldly life (from birth until death) which is temporary, and the life of the hereafter (that begins after death) which is eternal and permanent.  Thus, human life per se is one complete whole which is eternal, although divided into two stages. Islam desires welfare of mankind for this complete whole.  Human welfare, W, is thus a function of welfare on both the temporary stage, Wρ and that in the permanent stage, Wρ’ of life.

In a functional form,

  W = fı (Wг Wр) … (1)

Here, Wι and Wр are again functions of separate sets of variables which determine welfare in the temporary and permanent stages of life respectively. The functions are as follows :
  Wι = f2 (Xг D) … (2)

  Wр = f3 (Xр’ D) … (3)

  with fг fр’ fd > 0

Where D stands for economic development, Xι and Xp are variables unrelated to economic development but responsible for welfare in the temporary and permanent stages respectively. Some of the important determinants of Xι are the sense of satisfaction derived from human accomplishment in this world (philanthropic contributions etc.), compassion in human relationship, environmental peace and harmony and the like; Xр’ on the other hand, depends on formal Ibadah, services to humanity and so on. We shall concentrate our attention, however, on the determinants of D exclusively, and on an attempt to relate them to the human welfare functions spelt out above.

These formulations show that economic development is a common argument in both the individual welfare functions, Wι and Wр’ which implies that economic development is an explanatory variable in the overall welfare function, W.  In other words, economic development has an important role to play in the achievement of welfare in both stages of human life.

The uniqueness of the Islamic concept of economic development is that the terminology incorporates within it the welfare elements in both stages of human life.  The welfare of these two stages is so related that Wр cannot alone maximize W, if Wι is zero or negative.  And since the permanent stage (life of the hereafter) is definitely longer than the temporary one, W can never be maximized by sacrificing a major and significant portion of Wр.  

There may, however, arise a trade-off problem : an increase in Wι may involve a decrease in Wр and vice versa. In such a situation the individual concerned may choose an appropriate combination of Wι and Wр on the basis of the weights of arguments in the objective function. An individual with preference for Wр is expected to maximize W subject to the constraint of some minimum value Wι. An individual at the other extreme may prefer to maximize W subject to the constraint of a minimum scale of Wр. A conscientious person with knowledge and practice of Islam may make his whole life as Ibadah by adhering strictly to the norms of Islam in all activities of life.  So, Wι and Wр reinforce each other instead of creating a trade-off problem. The strength of such reinforcement depends, however, on the degree of such conscientiousness exhibited by different persons.

Since Wι and Wр are arguments of a constrained maximization function both of which have economic development as an explanatory variable, it follows logically that merely the welfare of the worldly life cannot be the sole objective of economic development in an Islamic economy. It thus becomes apparent that economic development also contributes to welfare in the hereafter.  

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