The Islamic Piety and the Issue of Wealth

The capability of the Islamic worldview regarding wealth creation

In parallel with the vision of introducing a wide, deep and progressive worldview and with the mission of constructing a world of prosperity by developing its potential in the best way, Islam provides an effective framework for positive activities. The main elements of this framework can be derived here as principles important for wealth creation.

1. The balance of Hope and Fear

To live by the Islamic principles, a Muslim should weigh his expectations in the balance of hope and fear – hope for God’s mercy due to His Oft-forgiveness, and fear of God’s wrath due to our sins and a lack of value. Any imbalance might reduce an activity’s rate of return. For example, if a person is very hopeful for salvation, she will not feel a strong motivation to work because she feels that she is already guaranteed salvation. Likewise, if a person loses her hope she will not be able to pursue her goal at all. Hence, Islam is a religion of works and it requires that its followers play an active role in their lives because: “Every soul is a pledge for its own deeds”. In other words, although Islamic piety originates from the bottom of the heart, it should be embodied in the believer’s deeds and behaviors as much as possible; otherwise it has no fruit and will perish gradually. The Koran quite often states that “Allah is most merciful”; yet a Muslim, due to the Shiat doctrine of predestination, must still be mindful of the seeds planted by his actions. Since work is exalted as the means of pleasing God, the believer must labor zealously with no assurance of salvation. Hence, God uses good deeds accompanied with faith in many verses in the Koran to show that the faith is only a necessary condition for salvation but it needs good deeds to flourish; so the adherence to both good deeds and a solid belief in God is the exclusive way to salvation.

This incertitude of salvation, derived from the balance of hope and fear, provides a strong motivation for Muslims to do their best with regard to themselves and their society. And since Islam is a comprehensive religion and relates to economic, political, social and cultural aspects of his life, the Muslim can pursue all these activities and feel that his work is pious and in the service of God. Thus, the Islamic worldview rearranges his utility function in so lofty and transcendental a manner that all good deeds and services make him happy and satisfied. In fact, he regards himself as God’s servant by his grace and honor and it demands that he love people and offer his services to them. Such an exalted utility function will increase his nation’s wealth and will accumulate the stock of capital while no corruption will appear.

2. An optimum portfolio of ownership

Islam offers a quite elaborate plan of ownership. In this plan, the real and absolute ownership over the whole universe belongs exclusively to God. Humankind, as His vicegerent or steward, however, is authorized to use all this on behalf of Him to carry out the Islamic mission. Thus, in the light of this teaching a Muslim discovers a vast spiritual vocation to employ His

Almighty trust to fulfill his mission with pleasure, not to satisfy those utilities derived from his selfishness.

To realize its complex mission in the context of its vision, Islam acknowledges different forms of property rights simultaneously and lays down the principle of multi-faceted ownership. Thus Islam differs essentially from capitalism which respects unlimited private ownership as a key economic principle and focuses merely on efficiency and capital accumulation but does not concern itself at all with the Issue of social justice and the fatal, widening income gap. Although capitalism recognizes nationalization and public ownership too, these are exclusively legitimate in the case of social necessity. Islam also differs from socialism, which is biased toward public ownership as a main economic principle and which avoids recognizing private property rights over the means of production. Even if this school of thought satisfies the egalitarian distribution of wealth, it fails to satisfy political or economic freedoms as well as prosperity for a populace, because of its inefficiency (see: Hayek, 2001).

To benefit from maximum efficiency of economic performance while satisfying social justice, Islam sets up an optimum portfolio of different forms of ownership. It respects private property rights for economic activities as a key element of its multi-faceted principle and permits nothing to blemish it. This facet of ownership obviously guarantees motivation at the maximum level. In the meantime, in accord with Shiat jurisprudence, some natural resources and initial endowments such as deserts, mines, coasts and even desolate places -in some cases- belong to the legitimate Islamic government.  By proper reallocation and redistribution, these properties are employed as an effective lever to enhance social justice and to eliminate the deprivation of basic capabilities under the supervision of the Islamic government. Some other natural resources, especially renewable ones, such as forests, fisheries, and oceans, belong to public. The government can intervene in public properties as well as state properties in order to maximize the level of social benefit.

The question of rent seeking and corruption, as a result of government interference in redistribution of initial endowments, is a very appropriate question. The extent of rent seeking, however, depends on the degree of maturity of the society. In an advanced mature society—where people adhere to ethical principles enthusiastically and the legitimate, pious statesmen are dedicated to providing outstanding service to the society and there exists strong social over-head institutions such as mass media that critically monitor the functioning of the government—there is no toehold for rent seeking or corruption at all. Moreover, this sort of intervention never deviates the price mechanism, because it is a kind of lump-sum transfer of wealth before markets can reach a particular Pareto efficient allocation; as a matter of fact, it solves a market failure problem (See: Arrow, 1951).

3. The value of the practice and work

Islam is a religion of practice and it has already been pointed out that faith, in spite of its power, is fruitless and a dead end without good deeds and practice. It will lose its motivation power and its liveliness gradually, if

it remains out of practice. As a matter of fact, Islam supports positive not negative piety. Islam always warns against superficial concepts and rituals, against lifeless formalities and non-effective beliefs. In one representative verse God explains the full meaning of positive piety and righteousness as follows: “It is not righteousness that you turn your faces (in prayer) towards East or West; but it is righteousness to believe in God and the Last day, and the Angels and the Book, and the Messengers; to spend of your wealth – in spite of your love for it – for your kin, for orphans, for the needy, for the wayfarer, for those who ask, and for the ransom of slaves; to be steadfast in prayer and practice regular charity; to fulfill the contracts which you have made; and to be firm and patient, in pain and adversity and throughout all periods of panic. Such are the people of truth, the God – minded”[^17] . In this verse there is a beautiful and clear description of the righteous believer. It gives an understandable indication that the effective faith should be embodied in meritorious services and behaviors, not in senseless ritual and customs, and that the practice provides faith with nourishment in return. Hence, being a truly pious and righteous Muslim requires being a good citizen by supporting charitable institutions and social organizations solidly and loyally in all circumstances, as well as being obedient to God and being generous and kind to people sincerely and with love. In short, righteousness is not merely an empty declaration but rather it must be founded on strong faith and constant practice.

4. The dynamism of love

The ongoing challenge amongst Islamic economists is staying focused on the price mechanism and hence the optimality of the market outcome. Where there are unlimited wants but scarcity of resources, needless to say that there should be an institution through which all claims may be adjusted by either the invisible or the visible hand to maintain a balance between limited resources and the claims on them. Moreover, this institution should fit and be in harmony with other components of the whole system as well as the worldview, the strategy, and goals for which this system is generated. Otherwise, it sounds like a package of loosely connected items!

In the ideal laissez-faire capitalist economy, as we know, the price mechanism is an exclusive efficient filter to allocate scarce resources to satisfy unlimited wants. Socialism, on the other hand, believes that the price system alone is too blind to meet socio-economic goals so it necessarily leads to frustration. Thus, under this school of thought the slow and heavy public sector undertakes the duty of resource allocation through central planning, even though this is inefficient. As a moderate point of view, some Islamic economists such as Chapra (1992) portray the Islamic economy as an ideal system in which individuals benefit from a broad array of economic freedoms, including the right to private ownership and the liberty to trade at freely negotiated terms. At the same time, it requires individuals “to pass all claims on resources through the filter mechanism of Islamic values” (p. 335). In other words, as Rice (1999, 346) illustrates Chapra’s (1992) point of view: “the Islamic worldview implies that the market system should be maintained, but that the price mechanism be complemented with a device that minimizes unnecessary claims on resources. This device is themoral

filter . This means that people would pass their potential claims on resources through thefilter of Islamic values so that many claims would be eliminated before being expressed in the marketplace. Resources would not be allowed to be diverted to the production of luxuries until the production of necessities was ensured in sufficient quantities (Siddiqi, 1981). The definition of luxurious or extravagant is related to the average standards of consumption in a society, the idea being that large departure from the standards would not be permissible.”

I beg to differ slightly with Chapra’s argument. I think that the filter that minimizes claims on limited resources is still the price mechanism and there is no need to employ any complementary devices. Nevertheless, an ethical system always changes and impacts on the preferences pattern and consumers’ behavior hence their utility function or revealed preferences. For instance, a committed (or purposive) Muslim who loves serving people in order to seek the pleasure of God may be expected not to express demands for luxurious goods in the marketplace. In other words, his commitment requires him to shape his target function[^18] in a way that coordinates with his mission and his ultimate goal.

Accord with this analysis, such a divine fount of revealed preferences distinguishes a typical Muslim’s behavior from that of a secular person. For instance, instead of pursuing the inter-temporal preferences of an ordinary (immature or secular) person, the Muslim’s propensity to save is quite high so that he reduces his present consumption and invests it for unborn generations’ consumption. Therefore, the market of such a society shows a much stronger demand for capital goods than for consumption goods. Thus, on the one hand, the members of an Islamic mature society increase their labor supply and employ their whole endowments to access more efficient technology in production, while on the other hand, the piety and the Islamic value of thrift drive them not to increase the demand for consumption goods. Instead, the sense of social responsibility and the commitment to new generations’ prosperity motivate them to increase the demand for capital goods and hence an equilibrium between supply and demand will appear. Therefore, the extra supply of this market is absorbed in such a way that the society’s Production Possibility Frontier (PPF) expands, due to the increase of various kind of capital and to the access to more efficient technology. In this model, there is no need to worry about theParadox of Thrift, because the source of this paradox—the inadequateness of effective demand—is obviously absent here on account of the adequate effective demand for capital goods. More technically speaking, a society that is more farsighted and more concerned with developing future wellness programs, in order to accomplish the divine mission, requires working harder with a much higher propensity to save.  Based on the turnpike theorem and the economic literature of growth, the higher rate of propensity to save a society has, the more accelerating growth trend it can realize. Therefore, it is strongly expected that an Islamic society experiences a sharp growth trend coinciding with sustainable development when it unifies all aspects of life and all functional institutions following the Islamic worldview.

In addition, the strong love for God and for serving people, which originates from the mature form of self-interest, reduces the utility of leisure time for a devoted Muslim, because he should seize every opportunity serve people as beloved creatures of God. Thus, the motive power of love drives him to produce more and more and the characteristic function of Supply Side Economists will be satisfied. Besides, he has learned many invaluable lessons of the Islamic tradition which teach him to avoid being idle or less productive, such as:

Continual self-improvement (Imam Ali: He whose two days are equal is a sure loser.)

No tolerance for idleness (Apostle of Islam: God does not like those who spend their time for nothing.)

Excellence and quality of work, no tolerance for negligent behavior (Apostle of Islam: God likes that when someone does anything, it must be done perfectly well.)

To demonstrate the contribution of Islamic piety, in a positive sense, to wealth creation and the support of public goods in order to please Almighty God, rather than to satisfy the inferior desires that come from the mud-like self, I would like to offer two examples:

1. Both Sunni and Shiat consider Ali Ibn Abi Talib as an aesthetic detachment from worldly concerns and as a major role model for the standard of piety and nobility of character. Whereas a simple meal of a single barley loaf sufficed him when he was working hard in his plentiful farms and palms in Yanbu, Nakhilah, Wadi Tura 'a, and so on, many needy people were surviving on his income and enjoying his food (See: Al-Asqalani III p. 271). He dug many springs and cultivated many lands, but he endowed them generously in favor of poor people.

2. I consider Professor Muhammad Yunus, the founder of Grameen Bank, as a good example of positive monasticism. Detaching himself from a comfortable life as a typical professor, he dedicated and dedicates his time and his energy to provide the people of the poor class with a decent life full of human dignity.  His bank and the micro-credit policy which he adopted have greatly affected the lives of his people in Bangeladesh and beyond.