Academic journal article Islamic Sciences

Examining the Meta-Principles of Modern Economics and Their Implications for Islamic Banking and Finance

Academic journal article Islamic Sciences

Examining the Meta-Principles of Modern Economics and Their Implications for Islamic Banking and Finance

Article excerpt

There is no such thing as philosophy-free science; there is only science whose philosophical baggage is taken on board without examination. (Daniel Dennett) (1)


The Islamic tradition, like the other major religious traditions, places a great deal of emphasis on vision, intention, and direction. The Qur'anic query So where then are you headed? (Q 81:26) harkens the reader to constantly examine one's motives and assumptions with regard to the ultimate goals being pursued in any endeavor. This intricate interplay between means and ends is of vital importance, particularly in examining the role of any social or natural science, economics being no exception. This is far from being an exclusively Islamic proposition: noted economist E.F. Schumacher has alluded to this imperative in his book Small is Beautiful, highlighting that all economics is derived from a larger instructive paradigm of meta-principles. It was Schumacher's position that a viable alternative to what he considered the materialist excesses of modern economics would best be served by a faith-based paradigm. Though he highlighted Buddhism as an illustrative example in the landmark fourth chapter of his book, he noted, "The choice of Buddhism for this purpose is purely incidental; the teachings of Christianity, Islam or Judaism could have been used just as well." (2)

The foundational principles of the economic system that Schumacher was keen to replace had been well-secured in the centuries preceding him. This paper seeks to outline the intellectual and historical genealogies of these principles, for they are directly relevant to any debate concerning the meaning, content, and purpose of Islamic Economics and Islamic Finance, as well as the correctness or otherwise of their subsequent direction.

Aftermath of Colonization

Through the advent of the colonization of Muslim lands, most of the Islamic world was brought into a Western-imposed economic order for which it was ill-prepared. This resulted in the systemic unravelling and destruction of its traditional socio-economic structures and institutions. Consequently, most of the institutions with relevance to finance that exist today in the Muslim world, such as capital markets, corporations, etc., find hardly any antecedent in classical Islamic civilization. Likewise, contemporary perspectives and new understandings in regards to matters of wealth creation, debt, risk, etc., are all characterized by an ethos and belief seemingly alien to much of the Muslim and medieval world. Arguably, the "great western transmutation" (3) that so revolutionized political, economic, social, and human relations in the middle ages never occurred in the Muslim world. (4)

As a result, accompanying decolonization, the last four or five decades have seen an attempt in the Muslim world to 'return' to Islam, with scholars and academics attempting to recast economics and other social sciences into the light of Islam's normative principles. Arguably, however, such stated ideals have achieved little success in terms of their realizations. Scholars such as Nasr assert that the theoretical works of Islamic economics "failed to escape the centripetal pull of western economic thought," and have instead "been caught in the intellectual web of the very system it set out to replace." (5)

Intellectual Failure of Islamic Economics

The contention that Islamic economics has failed is based on the view that this project was derailed at the outset itself, by not successfully unpacking the epistemological and socio-historical foundations of modern economics (its underpinning meta-principles), and subsequently failing to transform them in accord with Islam's normative positions. According to Syed Naquib al-Attas, this is the key to any successful "Islamization of knowledge"; namely that the philosophical foundations underpinning that knowledge be critically recast into the Islamic metaphysical and axiological framework. …

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