In the conventional economics , analysis assumes that human beings are inherently selfish , that their primary concern is to derive maximum satisfaction or utility ; and that in so doing they maximize the utility of the society as a whole. The capitalist guru , Adam Smith ( d : 1776 ) , in his book , ‘ The Wealth of Nations ’, argued strongly in this principle. As a result , under capitalism , the selfish behaviour of individuals and nations is not only rationalized but also encouraged.
Thus , the primary motivating force in this process is self – interest. The serving of self- interest by everyone in a free and competitive market environment serves the social interest by leading to a most ‘ efficient ’ and ‘ equitable ’ distribution. In this way , the market system thus sidesteps the crucial issues of ethnics and socio – economics justice by asserting that market forces are sufficient to keep self – interest within the bound of social well – beings. This theory has been widely criticized in the light of everyday observation due to its flaws in generating many moral decadence in society. As for socialism , it is built on the principle of hedonism : an individual behaves in a way to seek pleasure and minimise displeasure. Literally , it does also means that Man is inherently selfish. Unlike Adam Smith , Karl Marx deemed Man’s selfishness as a negative behaviour that need to be controlled and did not encouraged the selfishness of Man to dictate the economy but instead , making the government to control the needs of Man to prevent enslavement of Man to their own needs. His theory views Man as a factors of production and animals who live only to eat and die in ignoring the desire to own and abolishes the sacred right of ownership. Thus , in a socialist society , where Man ‘s trust and ownership is questioned , state ownership of all means of production and central planning became the primary instruments of its strategy for promoting efficiency and equity in resource use. This practice ironically leads to the emergence of a new privileged bureaucratic class which the theory itself condems. The fall of USSR and the breaking away of the states from Russia is an example of such unwanted tyrannical and dictatorial control shown by the people which thus reflects the failure of the socialist economic system.
In Islam economics , Islam recognizes that Man is created as a khalifah ( vicegerent ) on earth ( 2 : 30 , 6: 165 , 57 : 7 ). God , has also created the universe for the benefit of all human beings. God has made the resources of this earth available to man who has the responsibility to make use of them , to mould them and transform them according to his needs ( 57 : 7 ). This is inline with the basic assumptions of the Western perspective that Man is selfish where his needs need to be fulfilled. But , Islam does not merely encourage selfishness in Man but instead seeking to control it. As His vicegerents , human beings are accountable to Him and will be rewarded or punished in the Hereafter in accordance with his deeds relative to the Divine Guidance from Him. Thus , Man is deem to be a musthaklif ( acting as a trustee of God on this Earth ) rather than doing whatever he likes unconditionally ( 36 : 33 – 35 ).
Human beings by virtue of the fact that they have been endowed with freewill , rationality and moral consciousness combined with an inherent God – consciousness , are required to live in exclusive worship and obedience to God. Unlike the Western perspective where Man is considered as selfish alone , Islam considers Man to be altruistic as well. It recognises that every individual has the ability to play a positive role in promoting good by helping other human beings and arouses them to help one another in enjoining good and forbidding evil. Thus , it propagates that everyone should work for himself and his needs but at the same time make contribution through zakah , infaq and waqaf so to create a better society which is an obligation for every Muslim (At Taubah : 105 )
In this way , Islamic economics encourages free market economy but with a degree of government intervention that would prevent the building up of concentration of economic power and opposing totally any forms of exploitations and corruptions. In view of this perception of Man , Islam economic system is a system of balancing individual needs and societal needs through Divine Guidance as a basic framework for Man to do his economics. The motivational importance of this Islamic approach is that it aims at the establishment of justice to everyone and to all nations where it envisages a society where everyone is self – reliance and it expects all nations to live a respectable life. Also , by making Man understands his purpose of creation and his accountability , this will motivates him to actualise the aim of Islamic economy which is to eliminate absolute poverty in this world.
Ethical Principles in Economics
Man is essentially an ethical and moral being. Therefore , the most distinguishing features of human life is the sense of moral judgement. Consequently , ethical considerations have always been the focus of economies and have been a motivational factor in the establishment of their economics system.
In Western economics perspective , their ethical principles laid down are usually man – made. Westerners tend to develop their ethical standards by experience and ‘ feel ’. They also believe that ‘moral concepts , like all others , change with times’. Their idea of morality and ethics is largely utilitarian and materialistic with due respect to their secular outlook in life. It is highly relative and situational in nature and deprived of a ‘legitimate’ source of guidance. With this rationale sense of ethical principles laid down, moral decadence in society established vis a vis ‘ economic excellence’.
The practice of offering bribes , corruptions , pollution in whatever forms it maybe , market manipulation at the expense of consumers and etc , are some of the examples of Western outlook in their economics activities due to the lack of moral checks. The explosion and chemical pollution by Union Carbide at Bhopal due to the unethical attitude of the multinational business corporations towards the general public is a living example. The primary motivating force through self – interest of Man viewed by Adam Smith which would naturally and ultimately serve the social interest through a free and competitive market environment serves the social interest by leading to a most ‘efficient’ and ‘equitable’ distribution is a total flop. In contrary , due to the lack of ethical principles and leaving the market system to work on its own , has caused a lot of injustice to the society.
This can be seen in the wide differences of economic and educational status around the globe between the developed countries and the underdeveloped countries. In East Asia , in 1990 , nearly 170 million people were living below the poverty line and more than 100 million boys and girls were out of school at the secondary level. In Sotheast Asia and the Pacific , more than a third of children under five are malnourished. The idea of ethics and economics do not mix has motivated the economics outlook the westerners with resulted in a dismay for the world.
Islam places the highest emphasis on ethical values in human life. This high ethical emphasis is a motivational factor for the way individuals and society behaves in their economic life. In a way , Islam is basically an ethical and moral code of conduct for human life , Prophet Muhammad s.a.w. said : ‘I have been sent only for the purpose of perfecting good morals’ ( Kitab al – Muwattha / mam Malik ). The concept of ethics in Islam is not utilitarian and relative , rather its principles are eternal and absolute. Economic growth in Islamic economics is intergrated in the overall philosophy of human development. Thus , the final aim of economic pursuit is the development of man , not the Promethean man of secular humanism who relentlessly seeking material wealth for his own greedy needs but of the Virtuos Man , insan salih.
The principles of ethics are derived from the Divine sources , al – Qur’an and Sunnah. These divine sources not only prescribe the fundamental moral and ethical principles for the whole of human life , but also lay down broad ethical behaviours in the context of trade and business. Islam fully recognises the desirability of engagement in business ( 4 : 29 ) and infact , a businessman who performs his business operations with honesty and in accordance with the commands of God deserves to be rewarded by God in this world and the Hereafter as said by the Prophet Muhammad s.a.w. , ‘The honest businessman will be resurrected on the day of judgement among the Prophets , the most truthful and the martyrs’ ( Hadith Imam Tirmidhi ). And also business activities can become an Ibadah ( worship and obedience ) to God.
Basically , Islam encourages trade and business and prohibits usury ( 2 : 275 ). Thus , with the inspiration given by God to do trading and the rewards that comes with it , this has motivated a lot of Muslims to indulge in trades as their source of livelihood. But , encouragement is one aspect while ensuring that it is done correctly and justly is another. Thus , Islam does not allow ‘a free for all’ attitude but recognising Man’s weakness , God has given guidelines in doing business for the beneficial of the individual and society , to act as a check and balance. In the favourable disposition towards the market , Muslim societies in the past saw the need to introduce the institution called hisba to oversee fairness in market dealings , to check against monopoly and manipulations. Below are some of the basic principles that are laid down in by God al – Mighty and all – Knowing.
Some of the principles in the Qur’an governing the Islamic economics are :
a) Prohibition of riba’“Those who devour usury will not stand except as stands one whom the Evil One by his touch hath driven to madness. That is because they say : " Trade is like usury , " but Allah hath permitted trade and forbidden usury. Those who after receiving direction from their Lord , desist , shall be pardoned for the past ; their case is for Allah ( to judge ) ; but those who repeat ( the offence ) are Companions of the Fire ; they will abide there in ( forever )”. ( 2 : 275 )
b) Distributive Justice through charity and zakah
“It is not righteousness that ye turn your faces towards East or West ; but it is righteousness to believe in Allah and the Last Day , and the Angels , and the Book , and the Messengers ; to spend of your substance , out of love for Him , 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 practise regular charity ( zakah ) , to fulfil the contracts which ye have made; and to be firm and patient , in pain ( or suffering ) and adversity , and throughout all periods of panic. Such are the people of truth , the God - fearing”. (2 : 177)
c) Al – Falah
‘And there are men who say : " Our Lord ! Give us good in this world and good in the Hereafter , and defend us from the torment of the Fire ! " (2 : 201)
d) Prohibition of Wastage and Extravagance
‘O Children of Adam ! Wear your beautiful apparel at every time and place of prayer :
….eat and drink : but waste not by excess , for Allah loveth not the wasters.’
Therefore , in Islamic economics , economics growth towards economic excellence is a necessity as it is an important aspect for humanity as a whole. But the approach taken by Islam is to focus on the kind of growth that God wants for Man , so as to achieve a better life in this world and the Hereafter. This is the motivational driving force behind the approach taken by Islamic economic.
K.L / 1997 / Pg 20
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