History of Islamic economics

This is a sub-article of Islamic economic jurisprudence and Muslim world.

Between the 8th and 12th centuries, the Muslim world developed many advanced concepts, techniques and use in production, investment, finance, economic development, taxation, property use such as Hawala, an early informal value transfer system, Islamic trusts known as waqf, systems of contract relied upon by merchants, a widely circulated common currency, cheques, promissory notes, early contracts, bills of exchange, (mufawada), advanced agricultural techniques, high literacy rates, and enlightened capture and use of slaves.

Specific Islamic concepts involving money, property, taxation, charity included zakat (the "taxing of certain goods, such as harvest, with an eye to allocating these taxes to expenditures that are also explicitly defined, such as aid to the needy."); Gharar ("the interdiction of chance ... that is, of the presence of any element of uncertainty, in a contract (which excludes not only insurance but also the lending of money without participation in the risks); and riba (charging interest or at least high interest on money lent). These concepts, like others in Islamic law and jurisprudence, came from the "prescriptions, anecdotes, examples, and words of the Prophet, all gathered together and systematized by commentators according to an inductive, casuistic method." ^[1] Sometimes other sources such as al-urf, (the custom), al-'aql (reason) or al-ijma (consensus of the jurists) were employed.^[2] In addition, Islamic law has developed areas of law that correspond to secular laws of contracts and torts.

Self-described "Islamic economics" "emerged" in the 1940s, and as of 2004 "Islamic Banks" have been established in over 70 countries and interest has been banned in three: Pakistan, Iran and the Sudan.^[3]

Early Islamic economics

One economic policy of the Prophet in early Islam was a ban on charging fees and rents and a ban on permanent buildings in the market of Medina - only tents were allowed there. This is said to have helped poor traders.^[4]

Social responsibility in commerce

Social responsibility in commerce was stressed in Islam. As a result, the development of Islamic banks and Islamic economics did not allow usury. No interest rate was allowed, and investors were not permitted to escape the consequences of any failed venture—all financing was equity financing (Musharaka). In not letting borrowers bear all the risk/cost of a failure, an extreme disparity of outcomes between "partners" is thus avoided. Ultimately this serves a social harmony purpose. Muslims also could not and cannot (in shariah) finance any dealings in forbidden goods or activities, such as wine, pork, gambling, etc. Thus ethical investing is the only acceptable investing, and moral purchasing is encouraged.

Legal institutions

Hawala agency

Main article: Hawala

The Hawala, an early informal value transfer system, has its origins in classical Islamic law, and is mentioned in texts of Islamic jurisprudence as early as the 8th century. Hawala itself later influenced the development of the agency in common law and in civil laws such as the aval in French law and the avallo in Italian law. The words aval and avallo were themselves derived from Hawala. The transfer of debt, which was "not permissible under Roman law but became widely practiced in medieval Europe, especially in commercial transactions", was due to the large extent of the "trade conducted by the Italian cities with the Muslim world in the Middle Ages." The agency was also "an institution unknown to Roman law" as no "individual could conclude a binding contract on behalf of another as his [t (law)|agent]]." In Roman law, the "contractor himself was considered the party to the contract and it took a second contract between the person who acted on behalf of a principal and the latter in order to transfer the rights and the obligations deriving from the contract to him." On the other hand, Islamic law and the later common law "had no difficulty in accepting agency as one of its institutions in the field of contracts and of obligations in general."^[5]

Waqf trust

Main article: Waqf

The waqf in Islamic law, which developed in the medieval Islamic world from the 7th to 9th centuries, bears a notable resemblance to the English trust law.^[6] Every waqf was required to have a waqif (founder), mutawillis (trustee), qadi (judge) and beneficiaries.^[7] Under both a waqf and a trust, "property is reserved, and its usufruct appropriated, for the benefit of specific individuals, or for a general charitable purpose; the corpus becomes inalienable; estates for life in favor of successive beneficiaries can be created" and "without regard to the law of inheritance or the rights of the heirs; and continuity is secured by the successive appointment of trustees or mutawillis."^[8]

The only significant distinction between the Islamic waqf and English trust was "the express or implied reversion of the waqf to charitable purposes when its specific object has ceased to exist",^[9] though this difference only applied to the waqf ahli (Islamic family trust) rather than the waqf khairi (devoted to a charitable purpose from its inception). Another difference was the English vesting of "legal estate" over the trust property in the trustee, though the "trustee was still bound to administer that property for the benefit of the beneficiaries." In this sense, the "role of the English trustee therefore does not differ significantly from that of the mutawalli."^[10]

The trust law developed in England at the time of the Crusades, during the 12th and 13th centuries, was introduced by Crusaders who may have been influenced by the waqf institutions they came across in the Middle East.^[11]^[12]

References

↑ Roy, The Failure of Political Islam Harvard University Press, 1994, p.132
↑ Schirazi, Asghar, Constitution of Iran, (1997), p.170
↑ Martin, Richard C., ed. (2004). "Riba". Encyclopedia of Islam and the Muslim World. Macmillan Reference USA. pp. 596–7. ISBN 0-02-865912-0.
↑ Michael Bonner, "Poverty and Economics in the Qur’an", Journal of Interdisciplinary History, xxxv:3 (Winter, 2005), 391–406
↑ Badr, Gamal Moursi (Spring 1978), "Islamic Law: Its Relation to Other Legal Systems", The an Journal of Comparative Law (The American Journal of Comparative Law, Vol. 26, No. 2) 26 (2 – Proceedings of an International Conference on Comparative Law, Salt Lake City, Utah, February 24–25, 1977): 187–198, doi:10.2307/839667, JSTOR 839667
↑ (Gaudiosi 1988)
↑ (Gaudiosi 1988, pp. 1237–40)
↑ (Gaudiosi 1988, p. 1246)
↑ (Gaudiosi 1988, pp. 1246–7)
↑ (Gaudiosi 1988, p. 1247)
↑ (Hudson 2003, p. 32)

↑ {{Harv|Gaudiosi|1988 After the Islamic waqf law and madrassah foundations were firmly established by the 10th century, the number of Bimaristan hospitals multiplied throughout Islamic lands. In the 11th century, every Islamic city had at least several hospitals. The waqf trust institutions funded the hospitals for various expenses, including the wages of doctors, ophthalmologists, surgeons, chemists, pharmacists, domestics and all other staff, the purchase of foods and drugs; hospital equipment such as beds, mattresses, bowls and perfumes; and repairs to buildings. The waqf trusts also funded medical schools, and their revenues covered various expenses such as their maintenance and the payment of teachers and students.<ref>{{citation|last=Micheau|first=Françoise|title=The Scientific Institutions in the Medieval Near East|pages=999–1001}}, in {{Harv|Morelon|Rashed|1996|pp=985–1007}}</ref>

Classical Muslim commerce

During the Islamic Golden Age (roughly 786-1258 CE), guilds were formed though officially unrecognized by the medieval Islamic city. However, trades were recognized and supervised by officials of the city. Each trade developed its own identity, whose members would attend the same mosque, and serve together in the militia. Technology and industry in Islamic civilization were highly developed. Distillation techniques supported a flourishing perfume industry, while chemical ceramic glazes were developed to compete with ceramics imported from China. The systems of contract relied upon by merchants was very effective. Merchants would buy and sell on commission, with money loaned to them by wealthy investors, or a joint investment of several merchants, who were often Muslim, Christian and Jewish. Recently, a collection of documents was found in an Egyptian synagogue shedding a very detailed and human light on the life of medieval Middle Eastern merchants. Business partnerships would be made for many commercial ventures, and bonds of kinship enabled trade networks to form over huge distances. During the ninth century banks enabled the drawing of a check in by a bank in Baghdad that could be cashed in Morocco.<ref>Peters, Edward. ''Europe and the Middle Ages'', 1983. p. 125</ref> The concepts of welfare and pension were introduced in early Islamic law as forms of Zakat (charity), one of the Five Pillars of Islam, since the time of the Abbasid caliph Al-Mansur in the 8th century. The taxes (including Zakat and Jizya) collected in the treasury of an Islamic government was used to provide income for the needy, including the poor, elderly, orphans, widows, and the disabled. According to the Islamic jurist Al-Ghazali (Algazel, 1058–1111), the government was also expected to store up food supplies in every region in case a disaster or famine occurs. The Caliphate was thus one of the earliest welfare states, particularly the Abbasid Caliphate.<ref name="Crone 2005 308–9"/>

Economy in the Caliphate

In the medieval Arab Agricultural Revolution, a social transformation took place as a result of changing land ownership giving individuals of any gender,<ref>{{harvnb|Shatzmiller|p=263}}</ref> ethnic or religious background the right to buy, sell, mortgage and inherit land. Based on the Quran, signatures were required on contracts for major financial transactions concerning agriculture, industry, commerce, and employment. Copies of the contract were usually kept by both parties involved. There are similarities between Islamic economics and leftist or socialist economic policies. Islamic jurists have argued that privatization of resources of oil, gas, and other fire-producing fuels, animal pasture, and water is forbidden. The principle of public or joint ownership has been drawn by Muslim jurists from the following hadith of the Prophet of Islam: Ibn Abbas reported that Muhammad said: "All Muslims are partners in three things—in water, herbage (animal pasture) and fire." (Narrated in Abu Daud, & Ibn Majah)<ref name=mi19>[http://www.muslimtents.com/shaufi/b16/b16_19.htm ''Fundamentals of Islamic Economic System'']</ref> Anas added to the above hadith, "Its price is Haram (forbidden)"<ref>http://nation.ittefaq.com/issues/2009/06/08/news0531.htm {{wayback|url=http://nation.ittefaq.com/issues/2009/06/08/news0531.htm |date=20140727060242 }}</ref> Jurists have argued by qiyas that the above restriction on privatization can be extended to all essential resources that benefit the community as a whole as long as there is no evidence to the contrary.<ref name=mi19/> Aside from similarities to socialism, early forms of proto-capitalism and free markets were present in the Caliphate.<ref name="Europe p. 437">''The Cambridge economic history of Europe'', p. 437. [[Cambridge University Press]], ISBN 0-521-08709-0.</ref> An early market economy and early form of merchant capitalism developed between the 8th and 12th centuries.<ref>Timur Kuran (2005), "The Absence of the Corporation in Islamic Law: Origins and Persistence", ''American Journal of Comparative Law'' '''53''', pp. 785–834 [798–99].</ref> A vigorous monetary economy developed based on the wide circulation of a common currency (the dinar) and the integration of previously independent monetary areas. Business techniques and forms of business organization employed during this time included early contracts, bills of exchange, long-distance international trade, early forms of partnership (mufawada) such as limited partnerships (mudaraba), and early forms of credit, debt, profit, loss, capital (al-mal), capital accumulation (nama al-mal),<ref name=Banaji/> circulating capital, capital expenditure, revenue, cheques, promissory notes,<ref name="Robert Sabatino Lopez 2001">Robert Sabatino Lopez, Irving Woodworth Raymond, Olivia Remie Constable (2001), ''Medieval Trade in the Mediterranean World: Illustrative Documents'', [[Columbia University Press]], ISBN 0-231-12357-4.</ref> trusts (waqf), savings accounts, transactional accounts, pawning, loaning, exchange rates, bankers, money changers, ledgers, deposits, assignments, the double-entry bookkeeping system,<ref>Subhi Y. Labib (1969), "Capitalism in Medieval Islam", ''The Journal of Economic History'' '''29''' (1), pp. 79–96 [92–93].</ref> and lawsuits.<ref name="Ray Spier 2002 pp. 357–58">Ray Spier (2002), "The history of the peer-review process", ''Trends in Biotechnology'' '''20''' (8), pp. 357–58 [357].</ref> Organizational enterprises similar to corporations independent from the state also existed in the medieval Islamic world.<ref name="Said Amir Arjomand 1999 pp. 263">Said Amir Arjomand (1999), "The Law, Agency, and Policy in Medieval Islamic Society: Development of the Institutions of Learning from the Tenth to the Fifteenth Century", ''Comparative Studies in Society and History'' '''41''', pp. 263–93. [[Cambridge University Press]].</ref><ref name="Samir Amin 1978 pp. 3">Samir Amin (1978), "The Arab Nation: Some Conclusions and Problems", ''MERIP Reports'' '''68''', pp. 3–14 [8, 13].</ref> Many of these concepts were adopted and further advanced in medieval Europe from the 13th century onwards.<ref name=Banaji>Jairus Banaji (2007), "Islam, the Mediterranean and the rise of capitalism", ''[[Historical Materialism (journal)|Historical Materialism]]'' '''15''' (1), pp. 47–74, [[Brill Publishers]].</ref> The concepts of welfare and pension were present in early Islamic law as forms of zakat one of the Five Pillars of Islam, since the time of the Rashidun caliph Umar in the 7th century. The taxes (including zakat and jizya) collected in the treasury (bayt al-mal) of an Islamic government were used to provide income for the needy, including the poor, the elderly, orphans, widows, and the disabled. According to the Islamic jurist Al-Ghazali (Algazel, 1058–1111), the government was also expected to stockpile food supplies in every region in case of disaster or famine. The Caliphate was thus one of the earliest welfare states.<ref name="Crone 2005 308–9">{{cite book |title=Medieval Islamic Political Thought|first=Patricia|last=Crone|publisher=[[Edinburgh University Press]]|year=2005|isbn=0-7486-2194-6|pages=308–9|ref=harv|postscript={{inconsistent citations}}}}</ref><ref name=Hamid>{{cite journal |title=An Islamic Alternative? Equality, Redistributive Justice, and the Welfare State in the Caliphate of Umar|author=Shadi Hamid|journal=Renaissance: Monthly Islamic Journal|volume=13|issue=8|date=August 2003|ref=harv|postscript={{inconsistent citations}}}} (see [http://www.renaissance.com.pk/Augvipo2y3.html online])</ref>

Trade

Main article: Islamic geography

During the Islamic Golden Age, isolated regions had contact with a far-reaching Muslim trade network extending from the Atlantic Ocean and Mediterranean in the west to the Indian Ocean and South China Sea in the east, and covering most of the Old World,<ref name=Hobson-29-30/> including significant areas of Asia and Africa and much of Europe, with their trade networks .<ref name=Labib>Subhi Y. Labib (1969), "Capitalism in Medieval Islam", ''The Journal of Economic History'' '''29''' (1), p. 79-96.</ref> Arabic silver dirham coins were being circulated throughout the Afro-Eurasian landmass, as far as sub-Saharan Africa in the south and northern Europe in the north, often in exchange for goods and slaves.<ref>Roman K. Kovalev, Alexis C. Kaelin (2007), "Circulation of Arab Silver in Medieval Afro-Eurasia: Preliminary Observations", ''History Compass'' '''5''' (2), pp. 560–80.</ref> This helped establish the Islamic Empire (including the Rashidun, Umayyad, Abbasid and Fatimid Caliphates) as the world's leading extensive economic power in the 7th-13th centuries.<ref name=Hobson-29-30>John M. Hobson (2004), ''The Eastern Origins of Western Civilisation'', p. 29-30, [[Cambridge University Press]], ISBN 0-521-54724-5.</ref>

Agriculture in the medieval Islamic world

Further information: Arab Agricultural Revolution

From the 8th century to the 13th century in Muslim lands many crops and plants were planted along Muslim trade routes, farming techniques spread. In addition to changes in economy, population distribution, vegetation cover,<ref>Andrew M. Watson (1983), ''Agricultural Innovation in the Early Islamic World'', [[Cambridge University Press]], ISBN 0-521-24711-X.</ref> agricultural production, population levels, urban growth, the distribution of the labour force, and numerous other aspects of life in the Islamic world were affected according to Andrew Watson.<ref name=Watson>Andrew M. Watson (1974), "The Arab Agricultural Revolution and Its Diffusion, 700-1100", ''The Journal of Economic History'' '''34''' (1), p. 8-35.</ref> However this is disputed by other scholars, who claim cultivation and consumption of staples such as durum wheat, Asiatic rice, and sorghum as well as cotton were already commonplace centuries before,<ref>Decker, Michael (2009), "Plants and Progress: Rethinking the Islamic Agricultural Revolution", Journal of World History 20 (2): 187–206, doi:10.1353/jwh.0.0058.</ref> or that agricultural production declined in areas brought under Muslim rule in the Middle Ages.<ref>Ashtor, E (1976), A Social and Economic History of the Near East in the Middle Ages, Berkeley: University of California Press, pp. 58–63.</ref> The economic system in place in Muslim areas during this time incorporated reformed land ownership rules and labourers' rights, combining the recognition of private ownership and the rewarding of cultivators with a harvest share commensurate with their efforts also improved agricultural practices. The cities of the Near East, North Africa and Moorish Spain were supported by highly structured agricultural systems which required significant labor inputs. Such regional systems were often significantly more productive than the agricultural practices in most of Europe at the time which relied heavily on grazing animals and systems of fallowing. The demographics of medieval Islamic society varied in some significant aspects from other agricultural societies, including a decline in birth rates as well as a change in life expectancy. Other traditional agrarian societies are estimated to have had an average life expectancy of 20 to 25 years,<ref>{{citation|last=Shatzmiller|first=Maya|year=1994|title=Labour in the Medieval Islamic World|pages=63–4 & 66|publisher=Brill Publishers|isbn=90-04-09896-8|quote=At the same time, the "demographic behaviour" of the Islamic society as an agricultural society varied in some significant aspects from other agricultural societies, particularly in ways which could explain a decline in birth rate. It is agreed that all agricultural societies conform to a given demographic pattern of behaviour, which includes a high birth-rate and a slightly lower death-rate, significant enough to allow a slow population increase of 0.5 to 1.0 per cent per year. Other demographic characteristics of this society are high infant mortality, with 200-500 deaths per 1000 within the first year of birth, a lower average life expectancy, of twenty to twenty-five years, and a broadly based population pyramid, where the number of young people at the bottom of the pyramid is very high in relationship to the rest of the population, and that children are set to work at an early stage. Islamic society diverged from this demographic profile in some significant points, although not always consistently. Studies have shown that during certain periods, such factors as attitudes to marriage and sex, birth control, birth and death rates, age of marriage and patterns of marriage, family size and migration patterns, varied from the traditional agricultural model. [...] Life expectancy was another area where Islamic society diverged from the suggested model for agricultural society.}}</ref> while ancient Rome and medieval Europe are estimated at 20 to 30 years.<ref>{{citation|title=Life expectancy (sociology)|work=[[Encyclopædia Britannica]]|url=http://www.britannica.com/eb/topic-340119/life-expectancy|accessdate=2010-04-17|quote=In ancient Rome and medieval Europe the average life span is estimated to have been between 20 and 30 years.|publisher=[[Encyclopædia Britannica Inc.]]}}</ref> Conrad I. Lawrence estimates the average lifespan in the early Islamic Caliphate to be above 35 years for the general population,<ref>{{citation|title=The Western Medical Tradition|first=Lawrence I.|last=Conrad|publisher=[[Cambridge University Press]]|year=2006|isbn=0-521-47564-3|page=137}}</ref> and several studies on the lifespans of Islamic scholars concluded that members of this occupational group enjoyed a life expectancy between 69 and 75 years,<ref>{{citation|last=Shatzmiller|first=Maya|year=1994|title=Labour in the Medieval Islamic World|page=66|publisher=Brill Publishers|isbn=90-04-09896-8|quote=Life expectancy was another area where Islamic society diverged from the suggested model for agricultural society. No less than three separate studies about the life expectancy of religious scholars, two from 11th century Muslim Spain, and one from the Middle East, concluded that members of this occupational group enjoyed a life expectancy of 69, 75, and 72.8 years respectively!}}</ref><ref>{{citation|title=A Quantitative Approach to Medieval Muslim Biographical Dictionaries|first=Richard W.|last=Bulliet|journal=Journal of the Economic and Social History of the Orient|volume=13|issue=2|date=April 1970|publisher=Brill Publishers|pages=195–211 [200]}}</ref><ref name="Ahmad 2007 246–248 246">{{citation|title=''Authority, Conflict, and the Transmission of Diversity in Medieval Islamic Law'' by R. Kevin Jaques|first=Ahmad Atif|last=Ahmad|journal=Journal of Islamic Studies|year=2007|volume=18|issue=2|pages=246–248|doi=10.1093/jis/etm005}}</ref> though this longevity was not representative of the general population.<ref>{{citation|last=Shatzmiller|first=Maya|year=1994|title=Labour in the Medieval Islamic World|page=66|publisher=Brill Publishers|isbn=90-04-09896-8|quote=This rate is uncommonly high, not only under the conditions in medieval cities, where these ‘ulama’ lived, but also in terms of the average life expectancy for contemporary males. [...] In other words, the social group studied through the biographies is, a priori, a misleading sample, since it was composed exclusively of individuals who enjoyed exceptional longevity.}}</ref> The early Islamic Empire also had the highest literacy rates among pre-modern societies, alongside the city of classical Athens in the 4th century BC,<ref>{{citation|title=Delivering Education|author=Andrew J. Coulson|page=117|publisher=[[Hoover Institution]]|url=http://media.hoover.org/documents/0817928928_105.pdf|accessdate=2008-11-22|quote=Reaching further back through the centuries, the civilizations regarded as having the highest literacy rates of their ages were parent-driven educational marketplaces. The ability to read and write was far more widely enjoyed in the early medieval Islamic empire and in fourth-century-B.C.E. Athens than in any other cultures of their times.}}</ref> and later, China after the introduction of printing from the 10th century.<ref>{{citation|author=Edmund Burke|title=Islam at the Center: Technological Complexes and the Roots of Modernity|journal=[[Journal of World History]]|volume=20|issue=2|date=June 2009|publisher=[[University of Hawaii Press]]|doi=10.1353/jwh.0.0045|pages=165–186|quote=The spread of written knowledge was at least the equal of what it was in China after printing became common there in the tenth century. (We should note that Chinese books were printed in small editions of a hundred or so copies.)}}</ref> One factor for the relatively high literacy rates in the early Islamic Empire was its parent-driven educational marketplace, as the state did not systematically subsidize educational services until the introduction of state funding under Nizam al-Mulk in the 11th century.<ref>{{citation|title=Delivering Education|author=Andrew J. Coulson|page=117|publisher=[[Hoover Institution]]|url=http://media.hoover.org/documents/0817928928_105.pdf|accessdate=2008-11-22|quote=In neither case did the state supply or even systematically subsidize educational services. The Muslim world's eventual introduction of state funding under Nizam al-Mulk in the eleventh century was quickly followed by partisan religious squabbling over education and the gradual fall of Islam from its place of cultural and scientific preeminence.}}</ref> Another factor was the diffusion of paper from China,<ref>{{citation|author=Edmund Burke|title=Islam at the Center: Technological Complexes and the Roots of Modernity|journal=[[Journal of World History]]|volume=20|issue=2|date=June 2009|publisher=[[University of Hawaii Press]]|doi=10.1353/jwh.0.0045|pages=165–186|quote=According to legend, paper came to the Islamic world as a result of the capture of Chinese paper makers at the 751 C.E. battle of Talas River.}}</ref> which led to an efflorescence of books and written culture in Islamic society, thus papermaking technology transformed Islamic society (and later, the rest of Afro-Eurasia) from an oral to scribal culture, comparable to the later shifts from scribal to typographic culture, and from typographic culture to the Internet.<ref>{{citation|author=Edmund Burke|title=Islam at the Center: Technological Complexes and the Roots of Modernity|journal=[[Journal of World History]]|volume=20|issue=2|date=June 2009|publisher=[[University of Hawaii Press]]|doi=10.1353/jwh.0.0045|pages=165–186|quote=Whatever the source, the diffusion of paper-making technology via the lands of Islam produced a shift from oral to scribal culture across the rest of Afroeurasia that was rivaled only by the move from scribal to typographic culture. (Perhaps it will prove to have been even more important than the recent move from typographic culture to the Internet.) The result was remarkable. As historian Jonathan Bloom informs us, paper encouraged "an efflorescence of books and written culture incomparably more brilliant than was known anywhere in Europe until the invention of printing with movable type in the fifteenth century.}}</ref> Other factors include the widespread use of paper books in Islamic society (more so than any other previously existing society), the study and memorization of the Qur'an, flourishing commercial activity, and the emergence of the Maktab and Madrasah educational institutions.<ref>{{citation|author=Edmund Burke|title=Islam at the Center: Technological Complexes and the Roots of Modernity|journal=[[Journal of World History]]|volume=20|issue=2|date=June 2009|publisher=[[University of Hawaii Press]]|doi=10.1353/jwh.0.0045|pages=165–186|quote=More so than any previously existing society, Islamic society of the period 1000–1500 was profoundly a culture of books. [...] The emergence of a culture of books is closely tied to cultural dispositions toward literacy in Islamic societies. Muslim young men were encouraged to memorize the Qur'an as part of their transition to adulthood, and while most presumably did not (though little is known about literacy levels in pre-Mongol Muslim societies), others did. Types of literacy in any event varied, as Nelly Hanna has recently suggested, and are best studied as part of the complex social dynamics and contexts of individual Muslim societies. The need to conform commercial contracts and business arrangements to Islamic law provided a further impetus for literacy, especially likely in commercial centers. Scholars often engaged in commercial activity and craftsmen or tradesmen often spent time studying in madrasas. The connection between what [[Brian Street]] has called "''maktab'' literacy" and commercial literacy was real and exerted a steady pressure on individuals to upgrade their reading skills.}}</ref>

Islamic capitalism

Main article: Islamic

Early Islamic commerce applied a number of concepts and techniques, including bills of exchange, forms of partnership (mufawada) such as limited partnerships (mudaraba), and early forms of capital (al-mal), capital accumulation (nama al-mal),<ref name=Banaji/> cheques, promissory notes,<ref>Robert Sabatino Lopez, Irving Woodworth Raymond, Olivia Remie Constable (2001), ''Medieval Trade in the Mediterranean World: Illustrative Documents'', [[Columbia University Press]], ISBN 0-231-12357-4.</ref> trusts (see waqf), transactional accounts, loans, ledgers and assignments.<ref>Subhi Y. Labib (1969), "Capitalism in Medieval Islam", ''The Journal of Economic History'' '''29''' (1), pp. 79–96 [92–3].</ref> Organizational enterprises independent of the state also existed in the medieval Islamic world, while the agency institution was also introduced.<ref name="Said Amir Arjomand 1999 pp. 263"/><ref name="Samir Amin 1978 pp. 3"/> Medieval Europe adopted and developed many of these concepts from the 13th century onwards.<ref name=Banaji>Jairus Banaji (2007), "Islam, the Mediterranean and the rise of capitalism", ''[[Historical Materialism (journal)|Historical Materialism]]'' '''15''' (1), pp. 47–74, [[Brill Publishers]].</ref> A market economy was established in the Islamic world on the basis of an economic system resembling merchant capitalism. labour promoted capital formation in medieval Islamic society, and a considerable number of owners of monetary funds and precious metals developed financial capital. The Qur'an prohibited riba (usury), but this did not hamper the development of capital in any way. The capitalists (sahib al-mal) stood at the height of their power between the 9th and 12th centuries, but their influence declined after the arrival of the ikta (landowners) and after the state monopolized production; both these trends hampered any development of industrial capitalism in the Islamic world.<ref>{{Harv|Shatzmiller|1994|pp=402–3}}</ref> Some state enterprises still had a capitalist mode of production, such as pearl diving in Iraq and the textile industry in Egypt.<ref>Judith Tucker (1975), "''Islam and Capitalism'' by Maxime Rodinson", ''MERIP Reports'' '''34''', pp. 31–2 [31].</ref> From the 11th to the 13th centuries, the "Karimis", an enterprise and business group controlled by entrepreneurs, came to dominate much of the Islamic world's economy.<ref> Subhi Y. Labib (1969), "Capitalism in Medieval Islam", ''The Journal of Economic History'' '''29''' (1), pp. 79–96 [81–2]. </ref> The group was controlled by about fifty Muslim merchants labelled as "Karimis", who were of Yemeni, Egyptian and sometimes Indian origin.<ref>''The Cambridge economic history of Europe'', pp. 438–40. [[Cambridge University Press]], ISBN 0-521-08709-0.</ref> Each Karimi merchant had considerable wealth, ranging from at least 100,000 dinars to as much as 10 million dinars. The group had considerable influence in most important eastern markets, and sometimes influenced politics through its financing activities and through a variety of customers, including Emirs, Sultans, Viziers, foreign merchants, and common consumers. The Karimis dominated many of the trade routes across the Mediterranean, the Red Sea, and the Indian Ocean, and as far as Francia in the north, China in the east, and sub-Saharan Africa in the south, where they obtained gold from gold mines. Practices employed by the Karimis included the use of agents, the financing of projects as a method of acquiring capital, and a banking institution for loans and deposits.

Islamic socialism

Main articles: Islamic socialism and Bayt al-mal

Though medieval Islamic economics appears to have somewhat resembled a form of capitalism, some arguing that it laid the foundations for the development of modern capitalism,<ref>{{citation|title=Charlemagne, Muhammad, and the Arab roots of capitalism|first=Gene W.|last=Heck|publisher=[[Walter de Gruyter]]|year=2006|isbn=3-11-019229-2}}</ref><ref>{{citation|title=Capitalism and Freedom: The Contradictory Character of Globalisation|first=Peter|last=Nolan|publisher=Anthem Press|year=2007|isbn=1-84331-280-8|page=277}}</ref> Others see Islamic economics as neither completely capitalistic nor completely socialistic, but rather a balance between the two, emphasizing both "individual economic freedom and the need to serve the common good."<ref name=Hamid/> Abū Dharr al-Ghifārī, a Companion of Prophet Muḥammad, is credited by many as the founder of Islamic socialism.<ref>{{Citation |editor1-link=[[John Esposito]] |title=Oxford Encyclopedia of the Modern Islamic World |year=1995 |publisher=Oxford University Press |location=New York |isbn=0-19-506613-8 |oclc=94030758 |page=19}}</ref><ref>{{Cite web | url =http://www.oxfordislamicstudies.com/article/opr/t125/e30?_hi=0&_pos=5 | title =Abu Dharr al-Ghifari | work=Oxford Islamic Studies Online | accessdate =23 January 2010 }}</ref><ref>{{Citation |title=And Once Again Abu Dharr |authorlink=[[Ali Shariati]] |url=http://www.iranchamber.com/personalities/ashariati/works/once_again_abu_dhar1.php |accessdate=23 January 2010}}</ref><ref>{{Citation |title=Arab Socialism: A Documentary Survey |last=Hanna |first=Sami A. |coauthors=George H. Gardner |year=1969 |publisher=E.J. Brill |location=Leiden |page=273 |url=https://books.google.com/?id=zsoUAAAAIAAJ&pg=PA273&lpg=PA273#v=onepage&q= |accessdate=23 January 2010}}</ref><ref>{{Citation |last1=Hanna |first1=Sami A. |last2= |first2= |year=1969 |title=al-Takaful al-Ijtimai and Islamic Socialism |journal=The Muslim World |volume= 59 |issue=3–4 |pages=275–286 |url=http://www.financeinislam.com/article/1_37/1/309 |doi=10.1111/j.1478-1913.1969.tb02639.x |postscript=.}}</ref> He protested against the accumulation of wealth by the ruling class during ‘Uthmān's caliphate and urged the equitable redistribution of wealth. The concepts of welfare and pension were introduced in early Islamic law as forms of Zakat (charity), one of the Five Pillars of Islam, during the time of the Rashidun caliph Umar in the 7th century. This practiced continued well into the era of the Abbasid Caliphate, as seen under Al-Ma'mun's rule in the 8th century, for example. The taxes (including Zakat and Jizya) collected in the treasury of an Islamic government were used to provide income for the needy, including the poor, elderly, orphans, widows, and the disabled. According to the Islamic jurist Al-Ghazali (Algazel, 1058–1111), the government was also expected to stockpile food supplies in every region in case a disaster or famine occurred. The Caliphate is thus considered the world's first major welfare state.<ref name="Crone 2005 308–9">{{citation|title=Medieval Islamic Political Thought|first=Patricia|last=Crone|publisher=[[Edinburgh University Press]]|year=2005|isbn=0-7486-2194-6|pages=308–9}}</ref><ref name=Hamid>{{citation|title=An Islamic Alternative? Equality, Redistributive Justice, and the Welfare State in the Caliphate of Umar|author=Shadi Hamid|journal=Renaissance: Monthly Islamic Journal|volume=13|issue=8|date=August 2003}} (see [http://www.renaissance.com.pk/Augvipo2y3.html online])</ref> The Prophet Muhammad himself advocated common ownership, reportedly saying according to Ibn Abbas that "Muslims are partners in three things, water, herbage and fire" in the modern day terms this can probably be applied to water, food, energy, fuel, oil and gas.

Industrial development

Muslim engineers in the Islamic world were responsible for numerous innovative industrial uses of hydropower, early industrial uses of tide mills, wind power,and fossil fuels such as petroleum. A variety of industrial mills were used in the Islamic world, including fulling mills, gristmills, hullers, sawmills, shipmills, stamp mills, steel mills, sugar mills, tide mills, and windmills. By the 11th century, every province throughout the Islamic world had these industrial mills in operation, from al-Andalus and North Africa to the Middle East and Central Asia.<ref name = "Lucas">Adam Robert Lucas (2005), "Industrial Milling in the Ancient and Medieval Worlds: A Survey of the Evidence for an Industrial Revolution in Medieval Europe", ''Technology and Culture'' '''46''' (1), pp. 1–30 [10].</ref> Muslim engineers also employed water turbines, and gears in mills and water-raising machines, and pioneered the use of dams as a source of water power, used to provide additional power to watermills and water-raising machines.<ref name=Hassan>Ahmad Y Hassan, [http://www.history-science-technology.com/Articles/articles%2071.htm Transfer Of Islamic Technology To The West, Part II: Transmission Of Islamic Engineering]</ref> Such advances made it possible for many industrial tasks that were previously driven by manual labour in ancient times to be mechanized and driven by machinery instead in the medieval Islamic world. The transfer of these technologies to medieval Europe later laid the foundations for the Industrial Revolution in 18th century Europe.<ref name = "Lucas" /> Many industries were generated due to the Muslim Agricultural Revolution, including astronomical instruments, ceramics, chemicals, distillation technologies, clocks, glass, mechanical hydropowered and wind powered machinery, matting, mosaics, pulp and paper, perfumery, petroleum, pharmaceuticals, rope-making, shipping, shipbuilding, silk, sugar, textiles, weapons, and the mining of minerals such as sulfur, ammonia, lead and iron]. The first large factory complexes (tiraz) were built for many of these industries. Knowledge of these industries were later transmitted to medieval Europe, especially during the Latin translations of the 12th century, as well as before and after. The agricultural and handicraft industries also experienced high levels of growth during this period.<ref name=Labib/> In Islamic governments such as the Fatimid Caliphate, the tax collection, rather than being wasted on temples or courts, was invested industrial development, such as the Fatimid government's investment in the textile industry. In addition to government-owned tiraz textile factories, there were also privately owned enterprises run largely by landlords who collected taxes and invested them in the textile industry.<ref>{{Harv|Shatzmiller|1994|pp=47–8}}</ref>

Labour force

The labor force in the Caliphate were employed from diverse ethnic and religious backgrounds, while both men and women were involved in diverse occupations and economic activities.<ref>{{Harv|Shatzmiller|1994|pp=6–7}}</ref> Women were employed in a wide range of commercial activities and diverse occupations<ref name=Maya-400-401/> in the primary sector (as farmers for example), secondary sector (as construction workers, dyers, spinners, etc.) and tertiary sector (as investors, doctors, nurses, presidents of guilds, brokers, peddlers, lenders, scholars, etc.).<ref>{{Harv|Shatzmiller|1994|pp=350–62}}</ref> Muslim women also held a monopoly over certain branches of the textile industry,<ref name=Maya-400-401/> the largest and most specialized and market-oriented industry at the time, in occupations such as spinning, dyeing, and embroidery. In comparison, female property rights and wage labour were relatively uncommon in Europe until the Industrial Revolution in the 18th and 19th centuries.<ref>Maya Shatzmiller (1997), "Women and Wage Labour in the Medieval Islamic West: Legal Issues in an Economic Context", ''Journal of the Economic and Social History of the Orient'' '''40''' (2), pp. 174–206 [175–7].</ref> The division of labour was diverse and had been evolving over the centuries. During the 8th–11th centuries, there were on average 63 unique occupations in the primary sector of economic activity (extractive), 697 unique occupations in the secondary sector (manufacturing), and 736 unique occupations in the tertiary sector (service). By the 12th century, the number of unique occupations in the primary sector and secondary sector decreased to 35 and 679 respectively, while the number of unique occupations in the tertiary sector increased to 1,175. These changes in the division of labour reflect the increased mechanization and use of machinery to replace manual labour and the increased standard of living and quality of life of most citizens in the Caliphate.<ref>{{Harv|Shatzmiller|1994|pp=169–70}}</ref> An economic transition occurred during this period, due to the diversity of the service sector being far greater than any other previous or contemporary society, and the high degree of economic integration between the labour force and the economy. Islamic society also experienced a change in attitude towards manual labour. In previous civilizations such as ancient Greece and in contemporary civilizations such as early medieval Europe, intellectuals saw manual labour in a negative light and looked down on them with contempt. This resulted in technological stagnation as they did not see the need for machinery to replace manual labour. In the Islamic world, however, manual labour was seen in a far more positive light, as intellectuals such as the Brethren of Purity likened them to a participant in the act of creation, while Ibn Khaldun alluded to the benefits of manual labour to the progress of society.<ref name=Maya-400-401>{{Harv|Shatzmiller|1994|pp=400–1}}</ref> By the early 10th century, the idea of the academic degree was introduced and being granted at Maktab schools, Madrasah colleges and Bimaristan hospitals. In the medical field in particular, the Ijazah certificate was granted to those qualified to be practicing physicians, in order to differentiate them from unqualified quacks.<ref name=Alatas>{{citation|title=From Jami'ah to University: Multiculturalism and Christian–Muslim Dialogue|first=Syed Farid|last=Alatas|journal=Current Sociology|volume=54|issue=1|pages=112–132|doi=10.1177/0011392106058837|year=2006|quote=The idea of the degree most likely came from Islam. In 931 AD the Abbasid caliph al-Muqtadir had all practising physicians examined and those who passed were granted certificates (''ijazah''). In this way, Baghdad was able to get rid of its quacks (Hitti, 1970: 364). The ''ijazah'' was the principal means by which scholars and Sufis passed on their teachings to students, granting them permission to carry on their teachings. Although the learned scholars of Islam taught in formal institutions of learning such as the ''maktab'', the ''kuttab'', the ''madrasah'' and the ''jami`ah'', the degree was personally granted by the scholar to the student.}}</ref>

Urbanization

There was a significant increase in urbanization during this period, due to numerous scientific advances in fields such as agriculture, hygiene, sanitation, astronomy, medicine and engineering. This also resulted in a rising middle class population.<ref>Avner Greif (1989), "Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders", ''The Journal of Economic History'' '''49''' (4), pp. 857–82 [862, 874].</ref> As urbanization increased, Muslim cities' growth was largely unregulated, resulting in narrow winding city streets and neighborhoods separated by different ethnic backgrounds and religious affiliations. Suburbs lay just outside the walled city, from wealthy residential communities, to working class semi-slums. City garbage dumps were located far from the city, as were clearly defined cemeteries which were often homes for criminals. A place of prayer was found near one of the main gates, for religious festivals and public executions. Similarly, Military Training grounds were found near a main gate. While varying in appearance due to climate and prior local traditions, Islamic cities were almost always dominated by a merchant middle class. Some peoples' loyalty towards their neighborhood was very strong, reflecting ethnicity and religion, while a sense of citizenship was at times uncommon (but not in every case). The extended family provided the foundation for social programs, business deals, and negotiations with authorities. Part of this economic and social unit were often the tenants of a wealthy landlord. State power normally focused on Dar al Imara, the governor's office in the citadel. These fortresses towered high above the city built on thousands of years of human settlement. The primary function of the city governor was to provide for defence and to maintain legal order. This system would be responsible for a mixture of autocracy and autonomy within the city. Each neighborhood, and many of the large tenement blocks, elected a representative to deal with urban authorities. These neighborhoods were also expected to organize their young men into a militia providing for protection of their own neighborhoods, and as aid to the professional armies defending the city as a whole. The head of the family was given the position of authority in his household, although a qadi, or judge was able to negotiate and resolve differences in issues of disagreements within families and between them. The two senior representatives of municipal authority were the qadi and the muhtasib, who held the responsibilities of many issues, including quality of water, maintenance of city streets, containing outbreaks of disease, supervising the markets, and a prompt burial of the dead. Another aspect of Islamic urban life was waqf, a religious charity directly dealing with the qadi and religious leaders. Through donations, the waqf owned many of the public baths and factories, using the revenue to fund education, and to provide irrigation for orchards outside the city. Following expansion, this system was introduced into Eastern Europe by Ottoman Turks. While religious foundations of all faiths were tax exempt in the Muslim world, civilians paid their taxes to the urban authorities, soldiers to the superior officer, and landowners to the state treasury. Taxes were also levied on an unmarried man until he was wed. Instead of zakat, the mandatory charity required of Muslims, non-Muslims were required to pay the jizya, a discriminatory religious tax, imposed on Christians and Jews. During the Muslim Conquests of the 7th and 8th centuries conquered populations were given the three choices of either converting to Islam, paying the jizya, or dying by the sword. Animals brought to the city for slaughter were restricted to areas outside the city, as were any other industries seen as unclean. The more valuable a good was, the closer its market was to the center of town. Because of this, booksellers and goldsmiths clustered around the main mosque at the heart of the city. By the 10th century, the library of Cairo had more than 100,000 books, while the library of Tripoli is said to have had as many as three million books. The number of important and original Arabic works on science that have survived is much larger than the combined total of Greek and Latin works on science.<ref>N. M. Swerdlow (1993). "Montucla's Legacy: The History of the Exact Sciences", ''Journal of the History of Ideas'' '''54''' (2), pp. 299–328 [320].</ref>

Classical Islamic economic thought

Further information: Islamic economic jurisprudence

To some degree, the early Muslims based their economic analyses on the Qur'an (such as opposition to riba, meaning usury or interest), and from sunnah, the sayings and doings of Muhammad.

Early Islamic economic thinkers

Al-Ghazali (1058–1111) classified economics as one of the sciences connected with religion, along with metaphysics, ethics, and psychology. Authors have noted, however, that this connection has not caused early Muslim economic thought to remain static.<ref>Spengler (1964) p274</ref> Iranian philosopher Nasir al-Din al-Tusi (1201–1274) presents an early definition of economics (what he calls hekmat-e-madani, the science of city life) in discourse three of his Ethics:

"the study of universal laws governing the public interest (welfare?) in so far as they are directed, through cooperation, toward the optimal (perfection)."^[13]

Many scholars trace the history of economic thought through the Muslim world, which was in a Golden Age from the 8th to 13th century and whose philosophy continued the work of the Greek and Hellenistic thinkers and came to influence Aquinas when Europe "rediscovered" Greek philosophy through Arabic translation.<ref>[http://www.fasebj.org/cgi/content/full/20 October 1581 Matthew E. Falagas, Effie A. Zarkadoulia, George Samonis (2006). "Arab science in the golden age (750–1258 C.E.) and today", ''[[Federation of American Societies for Experimental Biology|The FASEB Journal]]'' '''20''', p. 1581-1586.]</ref> A common theme among these scholars was the praise of economic activity and even self-interested accumulation of wealth.<ref>Hosseini (2003) p36</ref> Persian philosopher Ibn Miskawayh (b. 1030) notes:

"The creditor desires the well-being of the debtor in order to get his money back rather than because of his love for him. The debtor, on the other hand, does not take great interest in the creditor."^[14]

This view is in conflict with an idea Joseph Schumpeter called the great gap. The great gap thesis comes out of Schumpeter's 1954 History of Economic Analysis which discusses a break in economic thought during the five hundred-year period between the decline of the Greco-Roman civilizations and the work of Thomas Aquinas (1225–1274).<ref>Schumpeter (1954)</ref> However, in 1964, Joseph Spengler's "Economic Thought of Islam: Ibn Khaldun" appeared in the journal Comparative Studies in Society and History and took a large step in bringing early Muslim scholars to the attention of the contemporary West.<ref>The prevalence and error of Schumpeter's thesis and the importance of Spengler's paper are discussed in Hosseini (2003).</ref> The influence of earlier Greek and Hellenistic thought on the Muslim world began largely with Abbasid caliph al-Ma'mun, who sponsored the translation of Greek texts into Arabic in the 9th century by Syrian Christians in Baghdad. But already by that time numerous Muslim scholars had written on economic issues, and early Muslim leaders had shown sophisticated attempts to enforce fiscal and monetary financing, use deficit financing, use taxes to encourage production, the use of credit instruments for banking, including rudimentary savings and checking accounts, and contract law.<ref>Hosseini (2003) p 33</ref> Among the earliest Muslim economic thinkers was Abu Yusuf (731-798), a student of the founder of the Hanafi Sunni School of Islamic thought, Abu Hanifah. Abu Yusuf was chief jurist for Abbasid Caliph Harun al-Rashid, for whom he wrote the Book of Taxation (Kitab al-Kharaj). This book outlined Abu Yusuf's ideas on taxation, public finance, and agricultural production. He discussed proportional tax on produce instead of fixed taxes on property as being superior as an incentive to bring more land into cultivation. He also advocated forgiving tax policies which favor the producer and a centralized tax administration to reduce corruption. Abu Yusuf favored the use of tax revenues for socioeconomic infrastructure, and included discussion of various types of taxes, including sales tax, death taxes, and import tariffs.<ref>Hosseini (2003) p 34</ref> Early discussion of the benefits of division of labor are included in the writings of Qabus, al-Ghazali, al-Farabi (873–950), Ibn Sina (Avicenna) (980–1037), Ibn Miskawayh, Nasir al-Din al-Tusi (1201–74), Ibn Khaldun (1332–1406), and Asaad Davani (b. 1444). Among them, the discussions included division of labor within households, societies, factories, and among nations. Farabi notes that each society lacks at least some necessary resources, and thus an optimal society can only be achieved where domestic, regional, and international trade occur, and that such trade can be beneficial to all parties involved.<ref>Farabi, Abu Nassr 1982: ''Madineh Fazeleh (Good City)'', Persian translation by Sajadi. Teheran, Iran: Zuhuri. p25</ref> Ghazali was also noted for his subtle understanding of monetary theory and formulation of another version of Gresham's Law. The power of supply and demand was understood to some extent by various early Muslim scholars as well. Ibn Taymiyyah illustrates:

"If desire for goods increases while its availability decreases, its price rises. On the other hand, if availability of the good increases and the desire for it decreases, the price comes down."^[15]

Ibn Taymiyyah also elaborated a circumstantial analysis of the market mechanism, with a theoretical insight unusual in his time. His discourses on the welfare advantages and disadvantages of market regulation and deregulation, have an almost contemporary ring to them.<ref>{{Citation|last=Baeck|first=Louis|title=The Mediterranean tradition in economic thought|year=1994|publisher=Routledge|isbn=0-415-09301-5|page=99}}</ref> Ghazali suggests an early version of price inelasticity of demand for certain goods, and he and Ibn Miskawayh discuss equilibrium prices.<ref>Hosseini (2003), p. 38</ref> Other important Muslim scholars who wrote about economics include al-Mawardi (1075–1158), Ibn Taimiyah (1263–1328), and al-Maqrizi.

Riba

Main article: Riba

The common view of riba (usury) among classical jurists of Islamic law and economics during the Islamic Golden Age was that it is only riba and therefore unlawful to apply interest to money exnatura sua—exclusively gold and silver currencies—but that it is not riba and is therefore acceptable to apply interest to fiat money—currencies made up of other materials such as paper or base metals—to an extent.<ref>{{Harv|Badr|1989|p=424}}</ref> The definition of riba in classical Islamic jurisprudence was "surplus value without counterpart." When "currencies of base metal were first introduced in the Islamic world, no jurist ever thought that paying a debt in a higher number of units of this fiat money was riba" as they were concerned with the real value of money rather than the numerical value. For example, it was acceptable for a loan of 1000 gold dinars to be paid back as 1050 dinars of total equal mass. The rationale behind riba according to classical Islamic jurists was "to ensure equivalency in real value" and that the "numerical value was immaterial." Thus an interest rate that did not exceed the rate of inflation was not riba according to classical Islamic jurists.<ref>{{Harv|Badr|1989|pp=424–5}}</ref>

Ibn Khaldun

Main articles: Ibn Khaldun and Muqaddimah

Post-colonial era

During the modern post-colonial era, as Western ideas, including Western economics, began to influence the Muslim world, some Muslim writers sought to produce an Islamic discipline of economics. In the 1960s and 70s Shia Islamic thinkers worked to develop a unique Islamic economic philosophy with "its own answers to contemporary economic problems." Several works were particularly influential,

Eslam va Malekiyyat (Islam and Property) by Mahmud Taleqani (1951),
Iqtisaduna (Our Economics) by Mohammad Baqir al-Sadr (1961) and
Eqtesad-e Towhidi (The Economics of Divine Harmony) by Abolhassan Banisadr (1978)
Some Interpretations of Property Rights, Capital and Labor from Islamic Perspective by Habibullah Peyman (1979).<ref>Bakhash, Shaul, ''The Reign of the Ayatollahs'', Basic Books, c1984, p.167-8</ref><ref name="international.ucla.edu">[http://www.international.ucla.edu/cms/files/behdadtxt.pdf Revolutionary Surge and Quiet Demise of Islamic Economics in Iran]</ref>

Al-Sadr in particular has been described as having "almost single-handedly developed the notion of Islamic economics" <ref>[http://www.meforum.org/article/825 The Renewal of Islamic Law]</ref> In their writings Sadr and the other Shia authors "sought to depict Islam as a religion committed to social justice, the equitable distribution of wealth, and the cause of the deprived classes", with doctrines "acceptable to Islamic jurists", while refuting existing non-Islamic theories of capitalism and Marxism. This version of Islamic economics, which influenced the Iranian Revolution, called for public ownership of land and of large "industrial enterprises", while private economic activity continued "within reasonable limits." <ref>Bakhash, Shaul, ''The Reign of the Ayatollahs'', Basic Books, c1984, p.172-3</ref> These ideas helped shape the large public sector and public subsidy policies of the Iranian Islamic revolution. In the 1980s and 1990s, as the Iranian revolution failed to reach the per capita income level achieved by the regime it overthrew, and Communist states and socialist parties in the non-Muslim world turned away from socialism, Muslim interest shifted away from government ownership and regulation. In Iran, it is reported that "eqtesad-e Eslami (meaning both Islamic economics and economy) ... once a revolutionary shibboleth, is indubitably absent in all official documents and the media. It disapperared from Iranian political discourse about 15 years ago [1990]." <ref name="international.ucla.edu"/> But in other parts of the Muslim world the term lived on, shifting form to the less ambitious goal of interest-free banking. Some Muslim bankers and religious leaders suggested ways to integrate Islamic law on usage of money with modern concepts of ethical investing. In banking this was done through the use of sales transactions (focusing on the fixed rate return modes) to achieve similar results to interest. This has been criticised by some western writers as a means of covering conventional banking with an Islamic facade.

Contemporary economics

In modern times, economic policies of the 1979 Islamic Revolution in predominantly Shia Iran were heavily statist with a very large public sector, and official rhetoric celebrating revolution and the rights of the dispossessed, although this tendency has faded over time.<ref>Roy, Olivier, ''Failure of Political Islam'', Harvard University Press, (1994), p.138</ref> In Sudan, the policies of the National Islamic Front party dominated regime in the 1990s have been the reverse, employing economic liberalism and accepting "market forces in the formulation of state policies." In Algeria, Jordan, Egypt, and Pakistan, Islamist parties have supported populist policies, showing a "marked reluctance to adopt austerity policies and decreased subsidies." <ref>Fuller, Graham E., ''The Future of Political Islam'', Palgrave MacMillan, (2003), p.142</ref> In recent years, Turkey had a rapidly growing economy and became a developed country according to the CIA.<ref>[https://www.cia.gov/library/publications/the-world-factbook/appendix/appendix-b.html Developed Countries], World Factbook, CIA.</ref> Indonesia, Saudi Arabia and Turkey are members of the G-20 major economies. In 2008, at least $500 billion in assets around the world were managed in accordance with Sharia, or Islamic law, and the sector was growing at more than 10% per year. Islamic finance seeks to promote social justice by banning exploitative practices. In reality, this boils down to a set of prohibitions—on paying interest, on gambling with derivatives and options, and on investing in firms that make pornography or pork.<ref>[http://www.forbes.com/2008/04/21/islamic-finance-sharia-islamic-finance-islamicfinance08-cx_ee_mn_0421islam_land.html Islamic Finance], ''[[Forbes]]'' (April 21, 2008)</ref> Another form of modern finance that originated from the Muslim world is microcredit and microfinance. It began in the 1970s in Bangladesh with Grameen Bank, founded by Muhammad Yunus, recipient of the 2006 Nobel Peace Prize.

Land reform

One issue "generally absent" from contemporary Islamist economic thought (with the exception of Sayyid Qutb) and action "whether moderate or radical" is the question of agrarian reform. Opposition to agrarian reform even played a role in Islamist uprisings (Iran 1963, Afghanistan, 1978).<ref name="RoyLandRef"/> At least one observer (Olivier Roy) believes this is primarily because it would "imply a reexamination of the concept of ownership", and in particular "throw into question the Waqf, endowments whose revenue ensures the functioning of religious institutions."<ref name="RoyLandRef"/> In the Islamic Republic of Iran, for example, waqf holdings are very large (in Khorasan Province, "50% of the cultivated lands belong to the religious foundation Astan-i Quds, which oversees" the Imam Reza shrine in Mashhad).<ref name="RoyLandRef"/> Thus questioning waqf property would mean questioning "the foundation of the financial autonomy of the mullahs and mosques", particularly among Shia Muslims.<ref name="RoyLandRef">Roy, Olivier, ''The Failure of Political Islam'' translated by Carol Volk Harvard University Press, 1994, p.136</ref>

Islamic stock index

In June 2005, the Dow Jones Indexes in New York and RHB Securities in Kuala Lumpur teamed up to launch a new "Islamic Malaysia Index"—a collection of 45 stocks representing Malaysian companies that comply with a variety of Sharia-based requirements. For example, total debt, cash plus interest-bearing securities and accounts receivables must each be less than 33% of the trailing 12-month average capitalization. Also, "gambling" on derivatives and options, and on investing in firms that make pornography or pork are also unacceptable. Islamic bonds, or sukuk, use asset returns to pay investors to comply with the religion's ban on interest and are currently traded privately on the over-the-counter market. In late December 2009 Bursa Malaysia announced it was considering enabling individuals to trade Shariah-compliant debt on its exchange as part of a plan to attract new investors.<ref>Opalesque (30 December 2009). "Malaysia exchange reviewing sharia compliant bonds".

↑ Hosseini (2003) p39
↑ Both quotes taken from Hosseini (2003) p36
↑ quoted in Hosseini (2003), p. 28

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