Islamic Discipline of Economics Emerged in late-colonial India

Prof Timur Kuran
Prof Timur Kuran

Prof Timur Kuran is known to be one of the most truculent critics of the whole movement that is called Islamic Economics. A PhD from Stanford University, Prof Kuran at present teaches at the University of Southern California. He also heads the King Faisal Chair of Islamic Thought and Culture. He has got more than fifty publications to his credit. Of them many have been translated in several European languages. His book, Private Truths, Public Lies: The Social Consequences of Preference Falsification has attracted the worldwide attention. Prof Kuran shares his thoughts with Dr. Shariq Nisar.

In many of your articles you had suggested that Islamic economics emerged from pre independent colonial India. How would you substantiate your arguments when not a single Islamic bank could be found in the region before the Islamic Bank Bangladesh Ltd. in 1983?

The concept of a distinctly and self-consciously Islamic discipline of economics emerged in late-colonial India, at a time when Indian Muslims were intensely preoccupied with a matter of identity: were they Muslims living in an increasingly hostile culture or Indians who belonged to one of many Indian religious communities? Which element of their identity took precedence, Islam or their Indianness? For Indians who came to be known as early Islamists, the answer was simple: they were Muslims first and foremost, and it was critical that they live as Muslims.

In pursuit of the goal of accentuating their Muslim identity, Mawdudi and his followers set out to identify Islamic alternatives to lifestyle choices, thought patterns, and even academic alternatives that they considered “Western” or simply “foreign.” One of the inventions of this period was Islamic economics. The concept was already in the air, and we do not know who coined the term. We do know that it was Mawdudi who popularized it.

Mawdudi and his associates also coined terms such as “Islamic banking” and “Islamic finance.” They did so to reinforce the Muslim identity rather than out of a desire to improve economic performance per se. This is entirely consistent, of course, with the premise of your question. Had the Indian (and eventually also Pakistani) Islamists of Mawdudi’s generation been motivated by economic development, they would have experimented with new forms of financial organization. That Islamic economics in general, and Islamic banking in particular, could serve economic development emerged as an afterthought, much later.

You are considered as one of most truculent critics of Islamic economics. What actually is the basis of your critique?

The Islamic world was once highly dynamic and, relatedly, economically developed by the standards of the day. Then it lost its institutional dynamism and fell economically behind. Today, the world’s Muslims are considerably poorer, on average, than the economically advanced countries. Although wealth is by no means the only determinant of well-being, it is one of them. Poverty is a source of humiliation and despair.

In view of this situation, there is an enormous need for innovative responses to real problems. Islamic economics has not been of help in this regard. In fact, by putting symbolism ahead of substance, and focusing on matters of identity, it has delayed the identification and implementation of sound economic reforms. Though not promoted as “Islamic”, the “Grameen Bank” has made a greater contribution to development than decades of economic experimentation undertaken recently in the name of Islam.

I’m not sure that any of the Muslim jurists who helped to codify the institutions now being promoted by “Islamic economics” would have found what passes as “Islamic economics” appealing. They tried to find workable solutions to real economic problems. My guess is that they would have dismissed the methodology of Islamic economics as flawed and its concerns as fanciful.

Do not you find any positive aspect in Islamic economics?

The Islamic world is in great need of venture capital. There are millions of ambitious, intelligent, and energetic Muslims who can’t get ahead for lack of capital. Give them funds, and they will work wonders. An “Islamic bank” operating in the manner prescribed by its charter would work like a venture capital firm. It would lend on a profit-and-loss sharing basis to people with economically promising ideas, rather than simply to established entrepreneurs with plenty of collateral.

For all their failures to date, I consider genuine Islamic banking to offer a potential for improving the use of capital. If the world’s Islamic banks start following the principles outlined in the literature on Islamic banking, they will begin making a noteworthy contribution to economic development in the Islamic world and beyond.

Turning Islamic banks away from conventional banking will require, of course, real work and a desire to put real economic results ahead of symbolism. Above all, it will require legal and political reforms that increase the level of honesty in credit markets to the point where investors find profit-and-loss sharing appealing.

What is the future of Islamic economics?

The Islamic world is currently in deep crisis. Although its growth rate was respectable until recently, in education its achievements have been disappointing, to put it mildly. It also stands out as lacking in political freedom and creativity. To compound the problem, fairly or unfairly, powerful countries see certain Muslim countries, and the Islamic world in general, as a source of instability.

For all these reasons and more, the Islamic world is likely to go through a major shake-up over the next few decades. Sooner or later, more democratic regimes will emerge, the creative side of Islamic civilization will reappear, and current political conflicts will pass.

Whether Islamic economics will survive the upheavals that we are likely to see, I do not and cannot know. If I had to guess, I would say that the doctrine will probably continue attracting to a small minority of Muslim economists. It will also grow in sophistication. However, the majority are likely to find secular schools of thought either more appealing intellectually or more useful technically.

What do you consider as the most important contribution of Islamic economics?

From Mawdudi onward, Islamic economists have been right that moral values and social norms contribute greatly to economic performance. Neoclassical economics long ignored values and norms, and this reduced its usefulness. Although Islamic economics has contributed next to nothing to the positive study of how values and norms emerge, and of how they do or do not change, at least focused attention on two very important aspects of personal fulfillment and social organization. This insistence has helped to create a favorable intellectual climate for the study of values and norms.

Any message to our readers?

In Islam, there is no priesthood. In principle, the individual is allowed, indeed is expected, to think for himself or herself. This principle applies, I would think, to intellectuals as well, including economists. It thus calls for questioning currently fashionable interpretations of what Islam requires in the economic arena. It calls for fresh thinking about ways out of current problems.


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