Relationship Of The Doctrine With Production

There are two aspects of the activity of production. The first is the objective aspect. It consists of the means that are employed, the process implemented and the labour expended in carrying out of the operation of production. The second is the subjective aspect. It consists of the motive or goal the person intends to achieve by the operation, and the evaluation of the operation in accordance with the conceptions of justice embraced.

The objective side of production is a subject studied under the science of economics together with physical sciences in order to discover the general laws that govern the means and the reality of the process. That enables man to employ those laws - upon their discovery - and organize the means and the process of production in a better and more efficient manner.

For example, the science of economics discovers the law of diminishing returns in agriculture. The law states that for an increase in labour and capital of a specific proportion, the corresponding increase in the output is in less. This disparity between the increase in labour and capital and the corresponding increase in the output continues and the return continues diminishing till the increase of the return becomes evenly balanced with the increase in labour and capital (costs). When this state of affair is reached it would not be to the interest of the farmer to spend any more labour and capital on the land. This law throws light on the (dynamics of) the operation process and by its discovery a producer can avoid wasting labour and capital and would be able to specify the factors of production which would guarantee him the optimum production results.

It is similar with the discovery that division of labour leads to greater production output. This fact has been discovered by economic science and has been employed by producers to increase and improve production output. The role of the science of economics in relation to production is therefore to reveal those laws, which enable the producer to organize the objective aspect of the production operation in a way that leads to an optimum result as to the quantity and quality of production output.

In this field, economic doctrines - of whatever ideology it may be - has no role whatsoever because the revelation of the general laws related to the realities of natural or social phenomena are the function of the respective sciences. They do not encroach into the space of doctrinal matters. It is because of this that different societies with their respective economic doctrines are joined together on the scientific platform and agree on making use of the contributions of the science of economics and all the other sciences for guidance in the field of production.

However, the doctrine has a positive role to play on the subjective side of the production process. Doctrinal contradictions - between societies embracing different economic doctrines - are reflected on this front, since every society has its own particular viewpoint as to the process of production. Each evaluates that process on the basis of its general conceptions and its own doctrinally driven methods as to the determination of the goals and application of their ideals.

What do we produce for and to how much do we produce? What goals should be set for the process of production? What types of the commodity do we produce? And should there be a central authority that regulated production and its planning? These are the questions, which the doctrine deals with.

Economic Growth

There is probably the only point, about which there is a complete agreement among there doctrines - of Islamic, capitalist and Marxist systems - on doctrinal ground. That is the point on economic growth (or growth in gross national production) and economic efficiency (the optimal utilization of resources) within their respective general framework.

All these economic doctrines are unanimous on the importance of these goals and their achievement by all mechanisms that are broadly in line with their respective frameworks. Likewise, because of the economic management style of a particular doctrine, it would reject everything that is not compatible with its doctrinal framework. Since the goals of economic growth and efficiency are an integral part of a whole, they have implications on the elements of the respective economic systems and are therefore aligned accordingly in a way agreeable to each doctrine.

For example, capitalism rejects any method of economic growth and wealth generation that clashes with its principle of economic freedom; and Islam rejects all of those means and conducts that are inconsistent with its theories on distribution and its ideals on justice. Marxism holds that the doctrine does not clash with economic growth and instead runs parallel with it. It however asserts that it is necessary to manage production and the modes of distribution, as will be discussed later.

Anyway, we will set out on the study of the Islamic theory of production based on the policies on growth held by Islam. Islam has enjoined upon the Islamic society to conform and has made economic growth and economic efficiency the doctrinal goals of the society. It lays down its economic policies accordingly. On one hand Islam set its general doctrinal frame and on the other hand considers the actual conditions and circumstances of the society. The state executes the policy within those limits.

We can see clearly the features of the principle of economic growth from its application during the era of the Islamic State and from the formal Islamic instructions preserved by history even to this day. The Commander of the believers, ‘Ali (a.s.) had formulated a program - with these instructions - to his Governor for Egypt, Muhammad ibn Abi Bakr, and had ordered him to implement them. It is reported in al-Amali of ash-Shaykh at-Tusi that when the Imam Ali (a.s.) appointed Muhammad ibn Abi Bakr as the Governor of Egypt, he wrote to him and commanded him to read the letter to the people of Egypt and to act upon whatever contained therein. The Imam wrote in this letter: -

“O servants of Allah! Verily, the pious acquired possession of the goodly transient things of the world and the goodly things of the future life. They shared with the worldly people, their worldly life, but the worldly people did not share with them their life hereafter. Allah has permitted them to have such of the worldly things as would be adequate for them and suffice them (as to their worldly needs). Allah the Mighty and the Glorious said:

“Say: Who has forbidden the beautiful (gifts) of Allah which He has produced for His servants and the pure and clean things (tayyibat) He has provided for sustenance?” Say: “They are in the life of this world for those who believe (and) purely for them on the Day of Judgment. Thus, do we explain the signs in detail for those who understand” (7:32).

They live in the world in the best way the world lives, eat the best things that the world eats. They share with the worldly people their world. They eat with them out of what they eat of the pure and the clean things and drink with them out of what they drink the pure and clean, and clothe themselves with the best of the dress with which they clothe themselves, and dwell in the best of the houses in which they dwell and ride the best of mounts they ride. While they enjoy the worldly pleasures with worldly people, tomorrow they will be the protégés of Allah; and desiring of Him His gifts, they will be given what they desire; and their prayer will not be rejected and nothing will be detracted from their share of pleasure. So Oh servants of Allah towards such things, he who has sense will be eager for and labour for it with piety of Allah. There is no power or might save in Allah”.

This admirable letter is not of the actual existence of the God-fearing people on earth or their actual historical existence, but had been intended to perfect the explanation of the worldview of God-fearing people about life and describe the pattern that a God-fearing society should establish on earth. It was because of this that he ordered to adopt and practice the contents of the letter and formulate his policy in light of the commandments and instructions given therein. The letter then is quite clear on material prosperity that results from economic growth and efficiency is a goal, which the god-fearing society will strive for and which the theory embraced by this society warrants in its conduct in this life.

The goal is however wrapped within the religious frame and is confined to limits as the Holy Qur’an declares:

“Oh You who believe! Make not unlawful the good things which Allah has made lawful for you, but commit no excess, for Allah loves not those given to excess”. (5:87).

So the prohibition related to excesses in exploitation of nature and its proliferation is the Qur’anic way of explaining this general Islamic cast.

Islam’s Means For Economic Growth

Islam at the time it embraced this principle and made the growth of production and wealth an economic goal employed all its doctrinal potentials for its realization and the development of the means and support that are in harmony with these potentials. The means employed to realize this goal were of two types:

First, the doctrinal means. It is a part of the functional duty of the Islamic social doctrine to build and deliver these means. Second, the purely applicative and practical means. A state that embraces a particular social doctrine uses these means by prescribing a practical policy accompanying the general doctrinal direction.

Islam amplified the means that come under its orbit as a creed professing the social doctrine and a vehicle of civilization in general.

The Islamic Philosophical Approach in Nurturing Economic Growth

On the intellectual front, the doctrinal means adopted by Islam are to inspire man with the drive for work and productive activity. It assigns a high value to labour and links it with man’s dignity, honour, his position before God and even his perception of himself. By that it made the motivation for enhancement of material wellbeing appropriate and legitimate in man’s life. It also gave such moral standards and clearly defined criteria in respect of work and idleness not known before. In light of these standards and criteria, a man’s work becomes an act of worship that deserves reward from God.

The man who labours to earn his livelihood becomes, before Allah, a person of higher merit than a worshipper who does not work for his livelihood. And idleness or avoidance of work becomes a defect in man’s character and a ground of his inferiority. It is mentioned in a tradition that when al-Imam as-Sadiq (a.s.) inquired about a person, he was told that while he is reduced to poverty, he keeps himself at home engaged in devotional acts (of worship) and his brothers provide him with the means of his livelihood. To this the Imam said: “He who works for his livelihood is a greater devotee than him.”

It is quoted that the Messenger of Allah (S) one day raised the hand of a hardworking tailor and imprinted a kiss upon it, saying: “Seeking of the lawful is a duty of every believing man and woman. One who eats what he acquires by the painstaking toil of his hand, will pass over the sirat like the twinkle of a lightening flash, he who eats what he earns by the painstaking toil of his hand, Allah will look upon him mercifully, thereafter, He will never punish him. He who eats what he earns lawfully with the painstaking toil of his hand, all the doors of the paradise will be made open for him to enter it through any of them.”

In another tradition it is reported that once a man passed by al-Imam Muhammad ibn ‘Ali al-Baqir (a.s.) while he (the Imam) was engaged assiduously working in his farm. Seeing the Imam full of sweat by the toilsome labour, the man exclaimed: “May Allah do good to you! Please tell me what, if death comes upon you while you are thus engaged?” He (the Imam) replied – and his reply expresses the meaning of labour in Islam: “If death were to come to me while I am thus engaged, it would come to find me engaged in rendering my obedience to the commandments of Allah.”

The Messenger of Allah (S), as mentioned in his sacred biography, whenever he saw a person of impressive appearance he used to think highly of him and to inquire his profession or business. If he were told that the man has no profession or does not do any work, the Prophet’s estimation of him becomes less favorable, and he (the Prophet) used to say: “ If a believer has no profession, he lives with his religion” (i.e. makes his religion as a mean of livelihood).

In several other traditions, work (for livelihood) is made a part of iman (faith). It is said therein: “To make use of a property in a proper way is a part of faith”. In another tradition of the Holy Prophet it is said, “there is nothing whatever a believer sows or plants and which man or beast feed upon but will be written down in his account as sadaqah (a charitable act)”.

It is reported from al-Imam Ja’far as-Sadiq (a.s.) that once said to Mu’adh – one of his companions, seeing him retired from his business: “O Mu’adh! Have you grown weak for business, or you have forsaken it?” Mu’adh replied: “I have neither grown weak nor forsaken it, but I have a plenty of wealth in my possession, and none has any due to me; and I do not see myself to consume it till my death”. The Imam, thereupon, told him as an advice: “Do not give it (trade) up, giving it up is to lose one’s wits”.

In another assembly meeting, the Imam in a reply to one who asked him to pray to Allah to give him means of livelihood said: “I will not pray for you. Seek it in a way as Allah, the Exalted, has asked you to seek it”.

It is narrated that when the verse:

“And for him who fears Allah, He prepares a way out and provides for him (his livelihood) from the source he could never imagine” (65:2-3),

was revealed, some of the companions (of the Holy Prophet) secluded themselves in their homes and engaged themselves in worship (of Allah); and they said: “Surely Allah is sufficient for us.” Then the Messenger of Allah (S) sent them (a message) saying: “Surely whoever acts like that, Allah will never grant his prayer, it is upon you to seek it (livelihood)”.

Just as Islam stands against a life of idleness and urges man to work, it also stands against leaving material wealth idle and frozen. Islam is against withdrawing them from the field of the productive and profitable utilization, and induces the owner to employ the maximum possible natural resources and wealth in productive use and in the service of man in the field of productive operation.

Islam considers the idea of keeping certain natural assets idle, and neglecting their development and utilization as a type denial and ingratitude in relation to the gift that Allah has bestowed upon His servants. Allah, the Exalted says:

“Say: “Who has forbidden the beautiful gifts of Allah which He has produced for His servants, and the things clean and pure (which He has provided) for sustenance?” Say: “They are, in the life of this world for those who believe, (and) purely for them on the Day of Judgment. Thus do We explain the signs in detail for those who understand”. (7:32).

God further says, in prohibiting superstitious beliefs and practices (prevalent among Arabs then) in respect of certain animals:

“It was not Allah Who instituted (superstitions like those of) a slit-ear she-camel, (bahirah), or a she-camel let loose for free pasture (saibah) or idol sacrifices for twin-births in animals (wasilah) or stallion-camels freed from work (hammi). It is blasphemers who invent a lie against Allah. But most of them lack wisdom”. (5:103).

He calls upon man to put to use resources on earth:

“And He it is Who made the earth manageable for you to traverse ye through its tracts and enjoy the sustenance which He provides; And to Him is the resurrection”. (67:15).

Islam gives preference to productive investment spending over consumption spending, because of its desires for production growth and expansion of wealth. This can be seen from traditions quoted from the Prophet and of the Imams forbidding sale of landed property or house and squandering the proceeds on consumption spending.

The Islamic Legislative Approach in Promoting Economic Growth

The Islamic legislative enactments that are consistent with the principle of the growth are extensive and cover multiple areas. These rules are indicative of the priority of growth in Islamic economic doctrine and facilitate the implementation of the corresponding measures in practise. We present a few of these legislative enactments and prescripts: -

1. Islam’s prescript ordaining seizure of a land from the possession of its owner if he leaves it idle or neglects it till it becomes a waste and is rendered unsuitable for cultivation. On the basis of this prescript, Wali Al-’Amr (the Head of the State) is empowered to seize the land in such a condition from its owner and hand it over to another person. The second person has to put it to the best productive use in the way he chooses, since it is not permissible to deprive the society from productive use of the land. On the contrary, it is necessary that the land contribute fully and continuously to the prosperity and wellbeing of man. Therefore in a situation whereby private ownership stands in the way of this, the law ordains that this (private ownership) right be revoked and that the ownership over the land be adapted to a form, which enables its productive utilization.1

2. Islam prohibits the practise of hima. Under this practise a person takes possession of an area of open space of wasteland by force, not by doing works to render the land fit for cultivation and turn it to productive use. The Islamic law links the right to the land with the work of reclamation and so on, not by forcible acquisition. Use of force has no relevance with reclamation and rehabilitation of the land for the good of man.

3. For the persons who were the first to productively use the natural assets, Islam does not give them the right to freeze those assets by delaying the development and extraction works. Islam also does not allow them to keep those reclaimed assets for themselves, whenever they discontinue the relevant works, since their control over these assets will eventually deprive the society of the benefits from their potential use. So Islam has tasked the Wali Al-’Amr (Head of the State) with the duty to repossess the natural assets from the individuals who have reclaimed them if they neglect the lands and fails to promptly resume appropriate works.

4. Islam empowers the Wali Al-’Amr to assign land only to a person who has the capacity to cultivate and work on it. Granting the land to anyone without the capacity to put to it to productive use means wasting and squandering the natural assets and their productive potentials.

5. Islam has disallowed earnings without work. For example, it is not permitted to sub-lease a piece of land to another person at a rate higher than that under the original lease in order earn from the difference. It is similar with hypothetical transactions we discussed previously. The elimination of the part of the intermediary between the land owner and the farmer - who directly cultivates - is obviously conducive for a high production level, since the intermediary plays no positive part in the production. He benefits at the expense of production without actually contributing to it.

6. Islam forbids interest and abolished usury on capital. With that it has steered towards transformation of funds in an Islamic society into productive capital allowing its share in gains earned by commercial or industrial enterprises. This transformation (of the capital funds) assures two advantages for production (and other economic activities):

First, it removes the deep conflict between the interest of business owners in the commerce and industry and that of the lenders and those who own capital. The capitalists, in a society that embraces the institution of interest, always wait for the golden opportunity when businesses are in dire need for capital. They would raise the interest rate and keep a tight hold on their purse, to exact the highest possible price.

But when the demand for capital fund declines because of lesser need for capital by commercial or industrial businesses and the rate of interest falls, we will see the lenders becoming more flexible and provide funding at a lower rate. It is clear that the abolishment of interest-based lending will put an end to this conflict, for its abolishment will eventually transform the lenders who previously lends on interest to be investors of capital fund (mudarabin) and partners in commercial or industrial enterprises on the basis of profit-sharing.

By this it thus defines the position and role of capital. The capital comes into the service of commercial and industrial enterprises, responding to the needs of businesses.

Second, the capital funds invested in the businesses eventually serve large commercial and industrial enterprises and long term projects with firmer commitment, assurance and security, because after the abolishment of the interest-based lending the owner of capital fund will have only profit in mind and this desire will drive him towards participation in big businesses with lucrative prospects and returns. In a system that allows interest-based lending, he would prefer lending his funds on interest to investing in those enterprises because the gains from lending are secure under all circumstances.

Moreover, he will prefer to lend on short term basis and would avoid long term lending because doing so may deprive him of the opportunity of bigger gains should the rate of interest rise in the distant future. Because of this, the borrower will employ the funds in short time businesses to match the term of his loan from the lender. Over and above that, business owners in the system with interest-based lending will not risk borrowing money for investment in any commercial or industrial undertaking unless they are convinced that the return from those businesses would be higher than the interest charged by the lender.

This will restrict their acceptable range of business undertakings and will freeze funds in the custody of the lenders, blocking their flow into market circulation in the form of investment or consumption spending. This will eventually lead to a slump in demand, a weakness in the general market and the emergence of economic crises and uncertainties.

With the abolishment of the interest-based lending and the transformation of the fund owners from being lenders into investors - venturing and participating directly in various commercial enterprises and industrial ventures - the business owners will see that it is in their interest to be content with less share of profit since they will not be obliged to surrender part of it for interests. They will also find that it will benefit them to re-invest the surplus from their profits, after setting aside for the operation and project-funding requirement. This will facilitate optimal investment and consumption spending in the system. It will discourage idling of funds, frozen in the coffers of lenders - in spite of the need for funding by businesses - thus frustrating new business investments and new products dependent on the capital.

7. Islam has forbidden some trades that are deemed unproductive like gambling, sorcery or witchcraft, and jugglery. It prohibits earning of income from carrying out these trades.

“And do not swallow your property among yourselves by wrongful means……” (2:188).

Indulging in such trades is a wastage and diversion of man’s productive capabilities and as such, remunerations paid to the practitioners of these trades are waste of financial resources that could have been converted into an agent for economic expansion and growth. A look at historical facts will reveal and bring home the extent of squandering that resulted from such trades and the damaging consequences on the economy, in particular the impairment of economic progress because of the dissipation of capabilities, efforts and financial resources.

8. Islam has forbidden hoarding of money and its withdrawal from circulation. This is done by imposition of tax by the Islamic state on stored and unused gold or silver coins. This tax, called Zakat, would deplete the hoarded assets with the passage of time because it is applied every year, draining two and a half per cent of the stored assets. The tax is continuously applied until the asset is reduced to twenty dinars. Because of this, it is considered a gradual appropriation of the hoarded funds, to the State treasury. By having this tax on the assets that have been stored away, the resources are diverted back into circulation supporting economic activities in the society. The money that would have otherwise been frozen in the coffers of their owners could now flow to finance production activities in industrial, agricultural and other economic pursuits.

Islam’s prohibition of unproductive wealth accumulation is not a mere accidental phenomenon of Islamic legislation. It is an expression of one of the most fundamental difference between its economic doctrine and that of capitalism. It reflects a method by which Islam has been able to insulate the society from the problems resulting from the anomaly in the role of money in the capitalist system, which often leads to economic cycles and severe crises in the capitalist society.

In order to show clearly the difference on this point - between the two doctrines - it is necessary for us to distinguish between the primary role of money and the incidental role it plays under the auspices of capitalism, and to then grasp the difference between these two and the effect on economic and production activities. Money by its nature is a medium of exchange that man employed in commerce to overcome difficulties in barter trades, which is simply direct exchanges of products.

With the economies practising division of labour, primary producers had faced difficulties with barter exchanges. Whenever a wheat producer is in need of wool, he would not be able to obtain wool in exchange for his wheat, unless and until the wool producer happened to be in need of wheat. If a shepherd intends to obtain his daily need of wheat, he will not be able to do so by way of a barter trade because the price of a sheep is larger than that of the amount of wheat he is seeking for his daily need, and it will not be possible for him to divide sheep into fractions.

In addition to these, in barter exchanges it is difficult to determine the value of the respective goods. In such trades, it would be necessary to know the value of a commodity in comparison to those of all other commodities, in order to ascertain its value relative to the others2. The money ‘mechanism’ in trades overcomes all these difficulties. It serves both as a common unit of measurement for value and as a medium of exchange.

Money serves the common measurement unit of value for all goods by comparing the value of all goods relative to the value of a particular product, enabling the value to be monetarily determined. The trade transaction can then be performed using money as a substitute for the respective goods. After the practise of barter trades - where goods were directly exchanged like wheat for wool – the use of money came into practise.

The single trade operation – under barter - was then transformed into two parts, the buying and selling transactions. The owner of wheat sells wheat for a hundred dirhams. He then needs to execute another operation. With the money, he purchases wool to fulfil his need. Thus, instead of a single transaction system of direct exchange of goods, it became two operations of exchanging goods and this overcame the earlier difficulties in the barter system.

We learned that the original roles of money when it was introduced were as a common measurement unit and a common medium of exchange. But after that, the role of money expanded beyond the two functions to overcome difficulties in the barter system. Instead, money was also employed for another role that was unrelated the difficulties of the barter system. Money gets hoarded and unproductively accumulated (to gain certain advantages).

As we saw earlier, with the entry of money into commerce, the single barter transaction for exchange of goods became two independent transactions to complete the exchange. The wheat producer will now sell his wheat and use the money obtained to subsequently purchase wool. The wheat producer may now put off the purchase of wool at later date. The use of money in commerce actually enables him to sell his wheat even when he does not desire to exchange his product for something else. He can now keep the money for use in his time of need. Money now also functions as an instrument to hoard and accumulate wealth.

This incidental role of money as an instrument for hoarding and accumulating wealth played a crucial part under the auspices of capitalism. It encouraged wealth accumulation and made interest a strong attraction for that. This leads to the disruption in the balance between the aggregate demand and aggregate supply of the consumption goods as well as capital goods in the entire system. In the era of barter system, this balance was assured on the basis of direct exchange of each product with another. The reason is simply that the producers during the barter era produced only his own consumption or for exchange with another commodity that was also for his own consumption. Thus the commodity he produced was always assured of the eventual matching demand. Hence, total production in the entire system matches the aggregate consumption, resulting in the equilibrium between supply and demand.

But after the decoupling of the buying and selling transaction – following the entry of money into commerce - it is not necessary for a producer to have a demand for another commodity that matches the quantity of commodity he produces. It is now likely that he will produce a commodity with the purpose of selling it and earning money with the intention to accumulate and add to that he had saved. He may now sell his goods without any plan to buy another commodity.

In such situation there would possibly be supply (of goods and services) for which there is no matching demand. Because of this, the equilibrium between total demand and total supply would be disturbed. This disequilibrium would grow proportionate to the desire of producers and the traders for wealth accumulation. As a result, a significant proportion of the produced goods will not be absorbed by the market. The excess production will have adverse consequences on the market and so will the accumulation (of financial resources by certain groups). The economic progress and the general economic wellbeing of the society will be subjected to significant volatility.

Capitalism, for a long period had overlooked the truth about these difficulties, which arose from the acts of accumulating money. The theory on disposal of money holds that whenever a person wishes to sell a particular product, he would demand money against it not for itself but to be able to obtain another commodity that will satisfy his need. This implies that the production of a commodity creates a demand for a similar commodity such that the demand and supply will always be equal.

The theory therefore takes it for granted that the seller of a commodity always sells a commodity with the goal of buying another commodity, despite the fact that such scenario is (only) true in the era of barter system where the selling and buying are transacted in a single trade. It is no longer true when monetary payment system is adopted for trades. In the new system, it is easy for a merchant to sell his commodity with the intention of accumulating more money for investment in interest-bearing loans.

In light of this understanding of the primary and the incidental roles of money, we may see the essential difference between Islam and capitalism. While capitalism acknowledges the use of money as an instrument for wealth accumulation, it encourages it and legalizes interest-based lending. On the contrary, Islam discourages (unproductive) wealth accumulation by imposing a tax on the accumulated and unutilized money, and promotes consumption and investment spending in productive areas, so much so that it is mentioned in a tradition on the authority of al-Imam Ja’far as-Sadiq (a.s.) that: “Allah has granted you surplus riches so that you spend it. He has not given you to amass it.”

Islam by its campaign against amassing money puts an end to one of the most severe challenges to economic growth that the capitalist society is suffering from. In the Islamic economic system - regulated by the Islamic laws - it is not necessary to accumulate and build capital fund to enable the financing major public spending in an economic downturn, as is the case with the capitalist society. The capitalist society would strengthen itself by building up of huge amount of capital fund, as a result savings accumulated in the banking system. This is then employed to finance major public projects. In a capitalist society ruled by capitalist institutions, it is inevitable to secure the help of large owners of private assets to support and participate in large economic projects.

It would not be feasible to undertake large projects except by encouraging saving and by pooling together the saving funds in the banking system. In a capitalist society it is necessary to adopt these measures for economic growth and expansion. But in the Islamic society, the state can deploy assets under common and state ownership to finance large economic projects and leave to the private sector ample space to explore and work on their potentials.

9. Prohibition of vain amusements and distractions. There are traditions prohibiting the sort of entertainments that distract one’s mind away from God and prevent one from remembrance of Him. The traditions disallow one from indulgence in several types of entertainment, amusement and diversion that erode one’s character of enthusiasm, earnestness and dedication, and the prime youthful energy and talent. That erosion of his character will eventually lead to withdrawal from efforts and labour on genuine and productive economic pursuits. Inappropriate circumstances may lead him to a life filled with pleasure seeking, neglect and spiritually hollow life.

10. The endeavour to the prevent concentration of wealth, in line with the verse of the holy Qur’an:

“…in order that it may not [merely] circulate between the wealthy among you…” (59:7).

We will explain this when we study and examine of the theory of social equilibrium in the Islamic economic system. This policy is to prevent concentration of wealth. Even though it is directly connected with distribution, it is also connected indirectly with economic growth. Concentration of wealth will have adverse consequences on production. When wealth gets concentrated in the hand of only a few, prevalence of misery will become common and the need of the large majority of people will become acute.

As a result, the general population will be unable to consume the quantity of goods and services that they actually need because of their limited purchasing power. Thus, large quantities of production output will remain unsold and industrial and commercial production will be shrink leading to economic slump.

11. Prohibition of market manipulations or even considering marketing and distribution process as an integral part of production. This will be discussed at the last stage of the revelation of the theory of production. We will then see its effect on production and growth.

12. Islam allows the wealth of a person to be given to his near relatives after his death. The order to this effect is the positive limb of the rules of inheritance. It may be regarded as an incentive in encouraging man towards work and the pursuits of economic activities in certain sectors, whereby at the end of his journey of life - when the thought of his own future becomes faint – his concern is replaced with the thought of his children and kin. Now, he will find in the rules of inheritance concerning distribution of his wealth and property after his death among his near relatives. That will encourage him to work and drive him to strive for the growth of his wealth, out of his eagerness for their welfare, as the ones who will keep alive his name after him.

As for the negative limb of the rules of inheritance, it is the set of rules that disconnect his relationship with his assets after his death. By these rules, it is not permissible for him to decide on his own the fate of his assets. This injunction is the result of the general theory of pre-production distribution and is connected with that, as we have previously learnt.

13. Islam has formulated the legal principle in relation to social security, as we will explain in the coming discussion. Social security plays a significant role in a particular dimension. It establish a perception at the individual level that he is given an assurance by the government and that his social status, honour and dignity in life is granted to him even if he fails or suffers loss in his undertaking.

This would act as a significant psychological support and would boost his enthusiasm. It will drive him to pursue economic success in various fields. It develops in him innovativeness and would be a novel medium to enhance his passion. This is in contrast to the case of one who lacks that sense of security. Such person would frequently avoid innovative efforts out of fear of a probable loss, which is a risk not only to his economic position but also to his social standing. Unless he enjoys assurances that provide him with the means to lead a dignified life in the event his efforts fail and end in losses, he would not have that boldness and resoluteness that the safety net provided by social security nurtures in the minds of those enjoying its shelter.

14. Islam made it unlawful to grant social security to able bodied men - who are capable of engaging themselves in economic activities - and disallowed them from living on alms. By this, it has prevented them from evading productive work. This naturally compels them to employ their capabilities for productive and fruitful works.

15. Islam has prohibited extravagance and squandering of wealth. This prohibition places a limit to consumption based on need. It makes available a great deal of funds for investment spending, instead of excessive and wasteful consumption spending.

16. Islam has made obligatory upon Muslims to achieve sufficiency of knowledge in all trades and all aspects of life.

17. Islam does not stop there. It has also made it a duty on Muslims to gain the highest level of knowledge - in all fields of life - in order to facilitate the acquisition of all moral, material and spiritual means by the Islamic community so they could take up the global lead role in terms of economic capabilities and other aspects. Allah, the Supreme says:

“And prepare against them what force you can”. (8:60).

Here, the word “what force you can” that occurs in the divine text denotes an unbounded and unconditional meaning. It includes all forms of capabilities that add to or increase the might of the nation (ummah) to carry out its mission to all nations of the world. Also, in the vanguard among those powers, are the intellectual and material means for the economic growth and productive employment of natural resources.

18. Islam has empowered the State to take the lead in all the economic sectors under public sector undertaking. Obviously, by employing the enormous State resources in the projects it carries out, there would be favorable spinoffs in other sectors. It will enable (the private sector) to undertake similar economic projects, learn from the experience the state gained in these ventures and adopt the best mode and practise for improvements in production and expansion of wealth.

19. Islam has conferred power and authority upon the State in developing the public sector. The State would be able to absorb part of the existing workforce, minimize redundancy and ensure maximum participation by the workforce in the overall economic activities.

20. Last, on the basis of definite principles - which we shall shortly examine in the inquiry of the Islamic theory of production – the State has been given the authority to supervise the control and planning of private sector production operations. This is to ensure that there is appropriate coordination and to prevent a situation of unbounded freedom and chaos, which may lead to disruptions in economic life.

Policies for Economic Growth

These are what Islam, as a doctrine, has contributed to the cause of economic growth and expansion of wealth. Having provided the doctrinal support, Islam leaves to the State to examine the actual conditions and circumstances of economic life, take stock of the natural assets available in the country, ascertain the size of workforce and the economic challenges they are experiencing. Having taken these into consideration, the state is to formulate an economic policy – within the limits of the doctrine - that will lead to growth of production, increase of wealth and better standard of living for the society.

On this basis, we will learn the relationship between the religion and the economic policy instituted by the State for a specified time frame - of say, five or seven years - to reach a set of goals at the end of that period. Such a policy is not a constituent part of religion and its decision and formulation are not a function of religion. The reason is this that the policy is subject to changes and adjustments in line with changes of circumstances, the capabilities of the society, as well as the nature of the problems and challenges the State has to deal with.

The economic challenges and the corresponding policies and measures differ from one case to another. The inhabitants of densely populated countries differ from those in sparsely populated states. Thus, each actual situation affects the policy decision that needs to be pursued under the given circumstance. Therefore, it is necessary for religion to leave the right decisions on the economic policies to the State as it sees appropriate for the respective circumstances. Religion will confine itself to the formulation of fundamental goals of the economic policy, its general limits and the overall religious framework. It would be obligatory upon the State to bind itself to it and formulate its policy within that framework.

Why Do We Produce?

We were examining from the theory of production the point on which there is a doctrinal unanimity among ideological trends of different economic systems. We have made it a pivotal point to start from in our detailed study of the doctrinal differences between these economic systems.

We have already learnt that economic growth and efficiency are the fundamental goals of the Islamic theory on production. These goals are common in the Islamic system and the other schools of economics. Even though there is unanimity between the different schools on this principle, they do differ on the details and in their ways of thinking about it due to their ideological viewpoints and cultural framework as well as their overall worldview.

For example, there is a difference among them about the fundamental objective as to the increase of wealth, and its role in the life of man. They differ on issues like the objective production and the role of wealth. Each school has a particular view that conforms to its ideological basis and its worldview. In our study of the Islamic economic system - and other economic doctrines – in relation to their respective theories on economic or production growth, we will realize that to know a system’s view on economic goals is not sufficient. Rather, we also need to have a comprehensive knowledge of its ideological basis, which explains the thought behind the doctrine about wealth and its role.

The ideology plays a key part in laying down the economic goals and the growth objectives will be adapted to fit the ideological framework. Indeed economic growth and wealth expansion objectives differ from one economic system to another in conformity with the respective ideological framework and the instruments employed by the respective systems. In ascertaining the ideological basis for the economic growth and wealth expansion, we cannot separate the economic doctrine from the larger body of thinking culture and worldview it belongs to.

It is on this basis that we choose the Islamic economic system and capitalism and study the ideas behind both as well the part each plays and the goals each sets out to achieve. We will study them not merely as two economic systems, but also as two different cultural patterns. That will help present the ideological basis for economic growth from the Islamic system and contrast it against that under the capitalist ideology.

Now in the material-driven culture that represents by capitalism on its historical and doctrinal economics aspects, economic growth and wealth expansion is frequently regarded as a key objective and a fundamental goal, because (material) wealth is everything according to the criteria, by which a person in this culture governs his life. He does not look for any other goals beyond that. He therefore strives to work for increase in wealth only for the sake of wealth itself and to achieve the maximum material comfort and wellbeing.

Capitalism accordingly considers the mechanism adopted and the course followed in attainment of economic growth and wealth expansion as a goal on its own that independent from distribution. It considers the objective as achieved and fully realized if the total wealth of the society increases irrespective of whether or not the wealth is equitably distributed in terms of the opportunity for each member of the nation to enjoy a fair share of the improved wellbeing.

For this reason, it encourages and promotes the use of industrial equipment during the machine age3 because employment of machinery facilitated increase of production and growth of the wealth of the society, even if it caused redundancy of thousands and led to the failure of small enterprises. So, wealth is the main objective in the material-led culture, and growth in the capitalist sense is measured by the increase in the total wealth of the society. The capitalist thinking binds the economic difficulty with scarcity of resources and natural challenges. Accordingly, the remedy for the difficulties is bound with increase in production output and efficient use of resources.

But Islam’s position is different. Wealth is not the main objective in Islam, notwithstanding the encouragement to seek wealth. Nor does Islam measure economic growth on the basis of total wealth of the society and regards it as independent from the distribution aspect. And Islam does not view that economic difficulty arises from scarcity of production such that its remedy is by increasing wealth. The standpoint of Islamic economic system is given below:

The Islamic Perception Of Wealth

We can ascertain Islam’s view about wealth in light of the texts, which deal with this aspect and try to describe the Islamic perception of wealth. We can divide these texts into two groups. At first glance the examiner of these texts will see contradictions between them as to their ideological position towards wealth, its purpose and its role. But by integrating these texts, he would be able to reconcile the contradictions and reach a broad Islamic perception about wealth enhancement, and will be able to form an inclusive viewpoint on both sets of texts.

The following traditions may be classified in the first group: -

a. The Messenger of Allah (S) said: “Riches are the prime help to the fear of Allah (piety, taqwa).”
b. From al-Imam as-Sadiq (a.s.): “The world is the most excellent aid for the world of the hereafter.”
c. From al-Imam al-Baqir (a.s.): “The (present) world is the best help to the seeking of the world of the hereafter.”
d. From the Messenger of Allah (S): “O Allah bless us and make us prosper in the matter of bread, part us not from each other. Had we not the bread, we would not have prayed; not have fasted; nor discharged our duties to our Lord.”
e. From al-Imam as-Sadiq (a.s.): “No good is the man, who does not earn money in the lawful way whereby he saves his honour, discharges his debts and discharges his obligations to his near relatives.”
f. A man told al-Imam as-Sadiq (a.s.): “By Allah I do seek the world and wish it to be given to me.” The Imam asked: “What do you wish to do with it?” He said: “I wish to meet my needs, my children and family members’ needs; to spend it in the way of Allah; to go to pilgrimage and perform ‘umrah with the help of it.” The Imam replied: “This seeking is not for this world. It is seeking the world of the hereafter.”
g. It is stated in the tradition: “He is not one of us who renounces this world for the next world; nor he, too, who renounces the hereafter for this world.”

The second group consists of the following traditions: -

a. From the Messenger of Allah (S): “He who loves this world does harm to his next world."
b. From al-Imam as-Sadiq (a.s.): “The love of this world is the head of every sin.”
c. Also from as-Sadiq (a.s.): “Far removed from Allah will be that servant of Allah who fancies nothing but his belly and his private parts.”
d. From Amir al-mu’minin, ‘Ali (a.s.): “The greatest help to morality is abstinence from the world.”

It is easy for anyone to note the contrast between the two sets of traditions. In the first group, the world, worldly wealth and riches are said to be the best help to the life hereafter, while in the second group it is said to be the main factor of every wrongful and sinful act. But this contradiction can be resolved by placing them together and ascertaining the respective contexts of the traditions. Material wealth and its enhancement are the best help for the life of the hereafter, and at the same time are also the main elements of all sinful acts. Because it has two extreme opposite aspects and it is the psychological frame (in how the wealth is perceived by the person) that brings to light whether it of one extreme or the other.

In the Islamic view, material wealth and its growth is an important objective. But it is a means, not an end itself. Wealth is not the main objective for which God had set before man on earth. It is instead a means for a Muslim to discharge his role of vicegerency and to employ it for the development of all the human potentials and to elevate man’s humanity in all the fields, spiritual and material.

So, the increase in wealth for the realization of the main objective of man’s vicegerency on earth is the best help for his the life of the hereafter. There is no good in a man who does not strive for it. He, who as a bearer of the life mission and yet abandons and neglects it, does not belong to the fold of Islam. As for striving for the growth of wealth merely for the sake of wealth itself - to regard that as the main pursuit in one’s life and to be pre-occupied and obsessed is so doing - that is the main source of all the wrongful acts and sins. It is this that detaches man far from his Lord, the Nourisher. Man is required to abstain himself from such attitude.

Islam wants a Muslim to strive for the enhancement of material wealth in order to gain control over it and to derive benefits from it. Man is not supposed to allow himself be subordinated to his wealth, surrender to it is control and to ruin the lofty goals set for him. Islam does not allow wealth and its acquisition modes that stand as a barrier between a Muslim and his Lord, the Sustainer, and cause him to overlook his ardent spiritual desires. Such relationship with wealth drags his spiritual progress and stands in the way of him fulfilling the grand mission of establishing and maintaining justice on earth, and would cause him to grip him strongly to the worldly life.

On the contrary, Islam encourages wealth and its means of acquisition that affirms a Muslim’s relationship with his Lord, the Generous Lord. It helps him perform his acts of worship with ease and comfort, and opens up before him a broad space to fully employ his talents and capabilities and helps him to realize the ideals of justice, brotherhood and dignity, which Muslims are required to strive for.

Aligning Economic Growth With (Equitable) Distribution

The capitalist ideology views economic growth and wealth creation as an aspect that is independent of wealth distribution. Islam rejects such view and aligns wealth creation with (equitable) distribution as joint goals. The measure of the material wellbeing and quality of life of the individual members of the community is also a major goal in the Islamic system, for economic growth in the Islamic sense is a means, not a ultimate end as we have learnt earlier. Therefore, the wealth creation process must contribute effectively to an equitable sharing of material wellbeing among the individual members of the community and afford them an environment whereby they can employ their utmost talents and abilities for the realization of their mission. Without these, the economic growth and wealth creation do not perform a favourable role in the life of man.

We find that in the letter which al-Imam ‘Ali (a.s.) wrote to the Governor of Egypt in which he describes the Islamic programme that the governor should follow. At the time he wanted to speak about growth in wealth as an objective of a pious society – in the words of the letter – he did not depict the accumulation of huge quantity of wealth, but painted a picture of ease and comfort of life prevailing over all the members of the society of the pious. He stated this to confirm and lay an emphasis on the fact that the growth of wealth is an objective only as far as it is reflected in the life of the people and in their means of living. But when wealth grows in a way that is disconnected from the life of people, and the masses devote themselves to wealth acquisition – instead of acquiring wealth in service of the people - then in such a situation, it becomes a type of idolatry as it has become an end in itself. The saying of the Messenger of Allah (S) confirms this and explains this kind of wealth and warns against its danger. He said: “The yellow (golden) dinar and white (silvery) dirham will destroy you as they have destroyed others before you.”

On this basis, when Islam makes economic growth the goal of the society, it requires coordination of the overall measures for wealth growth with those towards equitable sharing of material wellbeing and comfort for all members of the society. Islam also rejects any mode of economic growth that compromises the criteria on equitability and fairness in distribution of wealth.

In light of this, we can predict that if Islam - instead of capitalism - had held the rein of authority at the time of the rise of steam engine during the industrial age, it certainly would not have permitted the use of the new machines which doubled and boosted production output many folds to the extent that it exposed thousands of manual workers to peril and placed them in jeopardy. Islam would have allowed that only after a way is worked out to deal with the difficulties that mechanization would bring about. Allowing mechanization to boost production before having overcome these difficulties and the misery it would have caused is an illustration of how growth of wealth was embraced as an end itself.

Islam’s Conception Of Economic Problem

Last, Islam holds that the economic difficulties arise from on the handling and conception of the affairs, not from scarcity of resources or natural challenges. It is true that natural resources for production are limited and man’s need are numerous and diverse. It is also true that only a mythical community will enjoy abundance of resources and be free from any economic difficulties, such that there is no poverty therein and everyone will be able to satisfy all of his needs in that ‘paradise’.

But this does not prove that economic hardship that troubles humanity arises from the impossibility of this paradise. Rather, the attempt at explaining it on that basis is nothing more than an excuse from confronting the real reasons for the hardship - which could actually be resolved - by portraying the ideal economic scenario as imaginary and thus implying that the remedies are impossible in any circumstances. It is intended to justify and legitimize whatever solutions offered as ideal and conclusive, even when they are merely partial treatment of the problem and is confined to the economic growth dimension. That will subsequently lead the formulation of the economic policies within in the given framework of ‘difficulty and limitations’, instead of discovering an arrangement that would remove the difficulty and overcome the limitations. Capitalism did exactly this when it portrayed the ideal scenario as a mythical community.

To the proponents of capitalism, as long as long as there is scarcity of resources and resistance and challenges in nature, it is to be accepted that human needs will conflict and a person’s interests will interfere with those of others. In such situation, it is inevitable that the formulation of an economic system prioritize the needs and sets limits on their fulfilment.

Islam rejects this in its entirety and looks at the issue of economic problem with an optimistic attitude. We find that solution in holy words of Allah, the Supreme: -

“Allah it is He Who created the heavens and the earth, and sent down out of heaven water wherewith He brought forth fruits to be your sustenance. And He subjected to you the ships to run upon the sea at His commandment; and He subjected to you the rivers” (14:32).

“And He subjected to you the sun and moon constant upon their courses, and He subjected to you the night and day” (14:33).

“And He gave you of all you asked Him. If you count Allah’s blessing, you will never number it, surely man is sinful, unthankful!” (14:34).

These holy verses after mentioning the sources of wealth, which Allah has bestowed upon man, assure that they are sufficient for the satisfaction of man’s wants and needs and the accomplishment of what he asked for (and He gave you of all you asked Him). So, the actual problem did not arise from the scarcity of resources or the resistance of nature. Man himself causes the difficulty, as the last portion of the verse declares man’s injustice and ungratefulness. (Indeed man is the most unjust and the greatest of the ingrates).

So there are two reasons for the hardship and misery faced by mankind from the beginning of man’s history. One is man’s own injustice in wealth distribution and the other is his ungratefulness in respect of the gifts of Allah, the Supreme, by exploiting the wealth bestowed upon him. It is possible to overcome economic difficulty by looking at it from this human perspective and by ending man’s injustice and ingratitude by establishing a mechanism in providing fair access to natural resources and treasures, and an equitable distribution of the eventual production output.4

The Relationship Between Production And Distribution

Is there any relationship between production and (wealth) distribution? Islam and Marxism fundamentally differ on this issue, at the doctrinal level. Marxism affirms the existence of this relationship. It holds that every form of production pre-supposes - in conformity with the law of evolution and change - a particular mode of distribution, compatible with that form of production. The mode of distribution accompanies the production growth and its evolutionary changes.

When production assumes a new form that is incompatible with the earlier system of distribution, it is inevitable that conflicts and bitter struggles ensue. The relationship between production and the original mode of distribution is broken, giving way to a distribution system. The incorporation of the new and compatible distribution mode with the prevailing form of production support its development and progress.

Thus, Marxism considers that the system of distribution always follows the mode of production and adapts itself to the need of production. This dependence of the distribution system on the mode of production is an inexorable law of history and is unchangeable. The basic proposition in life is that a person produces and production goes on and increases continuously.

As to who confers the ownership right of the means of production and decides on the distribution (of the output) - and whether these are on the basis of master-servant in feudal ownership relations, or that of bourgeois ownership or proletariat ownership - all these are fixed by expediency and the interest of production itself. In every stage of history, the distribution relation adjusts to a form that matches the mode of production.

We have learnt this Marxist theory in detail in the first volume of this book. We were able to draw from our study a conclusion that contradicts the theory, disproves it philosophically and scientifically, as well as demonstrates its inaccurate historical interpretation5. Likewise, we have learnt the standpoint of Islam about this theory and its rejection of the dependence of distribution on the form of production6 (as claimed by Marxism).

Islam’s Guidance In Ensuring Equitable Distribution

Islam rejects the idea that distribution depends on the form of production and that distribution mode is conditioned by the forces of the natural law of history, as held by Marxism. But Islam does not sever all the relationship between distribution relations and the modes of production. Islam holds that this relationship between distribution and production is not a relationship of interdependence based on the law of nature, as presumed by the respective doctrine. Islam regulates production to conform to its principles of distribution, instead of adapting distribution to follow the needs of production, as stipulated by the Marxist theory.

The idea regarding this relationship stands on the basis of the following points: -

First, Islamic economic system regards the law it brings as permanent, invariable and valid for all time and the place. It is valid and applicable in this age of electricity and nuclear energy, as it was in age of steam engine and the age of windmill and manual labour. For example, the rule that stipulates ‘it is the right of a worker to keep the fruits of his labour’ is applicable in each of those.

Second, it regards the process of production, which a worker performs, as one of the phases of that general law in respect of distribution. For example, reclaiming a wasteland, uncovering a spring, harvesting wood from the forest and extraction of minerals, all these are processes of production. But at the same time, they constitute the function in the application of the general law of distribution on the wealth produced. Therefore, the sphere of production is also the arena for application of the rules on distribution.

Third, that when production levels improve and production capacities increase, man’s domination over nature is amplified. It would become possible for a person equipped with enough means of production to carry out his production activity with respect to natural assets on a scale and scope far larger and more extensive than that, which would have been possible for him in the past.

Considering these points, we learn that the evolution of production processes and the improvements in the means of production would make it possible for a person (with higher production capability) to maximize his production efforts - and benefit from the application of the general rules on distribution – while carrying out his production activities. This act may result in an eventual distribution that is grossly disproportionate to individual needs and would constitute a threat to general equilibrium and social justice, as required by Islam.

Let us take the example of the rehabilitation or reclamation of infertile lands. In the age of manual labour, a person was not capable of rehabilitating large areas of land. Since the theory does not recognize rehabilitation by way of hiring labour and a person only had the help of basic tools, he could only reclaim land on a limited scale. It was not within his reach to take advantage of the general rule on distribution while carrying out his production work. It was not thus beyond his ability to take into his possession huge tracts of land in conformity with the law that confers ownership right on the person undertaking the reclamation works (with his own labour).

But in this age of modern machineries and equipment, a person is capable of rehabilitating large areas, and thus can take advantage of general law of distribution. Under this situation, it is inevitable to have guidance in practise in order to reach the goals that correspond with the Islamic ideals of justice. In the Islamic system, the doctrinal relationship between production and distribution arises from this. In fact, it rests on the idea of ‘guided’ application, which defines production as a process of application of the law of distribution. This definition leads to a limitation that assures equitable distribution in line with the Islamic ideals and goals.

Islam limits the potential abuse (by taking advantage of the rules on distribution), by bestowing upon to the Head of the State (Wali Al-’Amr) the authority to intervene in relation to the application of the law on distribution and restricting its abuse. In the example that we have offered, the head of the state has the authority to prohibit an individual from undertaking reclamation of lands except within limits that conform with Islam’s idea of social justice. Islam has laid down the principle of the right of intervention by the state. We will examine this in detail in future discussion of the subject.

Thus, we learn that in relation to economic development and growth, the head of the Islamic state is tasked with the responsibility and also authorized to manage and intervene in production activities and determine the limits in the application of the general law of distribution, in such a way that the spirit of the law itself is upheld. This means that the principle of state intervention, whereby the state is authorized to guide the application of the law, is the tool that Islam uses to ensure appropriate use of the general law of distribution and its conformity with its ideas of social justice for all time and place.

Relationship Between Production And Circulation

Production as we know is a process of changing or remaking nature and natural materials in the form that best meets the needs of man.7

Circulation in the physical sense means transport or moving an object from one place to another, while circulation in the legal sense means all commercial operations by way of barter trades, or buying and selling transactions throughout. It is the second one that we propose to discuss here.

Circulation in the physical sense is obviously an extension of the production process. For instance, the transport of a product from one place to another usually creates a new convenience and constitutes an addition to its value in meeting the needs of man, as that brings it nearer to the end user. In respect of mineral deposits, a miner’s work essentially involves removing the natural deposits from an underground location and bringing them to the surface. Bringing any product nearer to its consumer adds to its usefulness and convenience to the user. All these are changes to a better form, in respect of the needs of man.

As regard to circulation in the legal sense, and the transfer of ownership from one person to another – as we have noticed in commercial transactions – it is based on the prescribed law on transactions that must be observed. Its relationships with production are established on doctrinal basis. We can therefore study the view of Islam on the relationship between production and circulation and the nature of their connection at the doctrinal level.

The Islamic conception about circulation and its relationship with production, doctrinally, does not only involve its doctrinal conception. It also plays an important part in the formulation of the general policy on product circulation and in filling the legal gaps that Islam has mandated the state to respond accordingly based on expediency.

Islam’s Conception Of Wealth Circulation

From our study of the texts, prescriptive dicta and the general juristic trends, the Islamic conception of circulation that comes to light is this. In principle, circulation is an integral part of production and should not be separated from its general sphere. A number of texts and legal prescriptions suggest this Islamic conception. This conception has also been widely accepted historically in line with the local needs and requirements that gave rise to this view.

Most probably circulation did not exist in societies where the members produced just enough to satisfy their respective needs, because man who lived in this self-sufficient environment did not have any need for goods produced by another person. There was therefore no need to physically move a product or trade it with another person.

Circulation arose in the life of man as a result of division of labour. That prompted each person to pursue production of particular goods and to produce a quantity of those goods in excess of his own requirement. That also led him to obtain his entire requirement of any other goods from other producers by way of trade. He offered them the goods they needed from what he produced, in exchange for his needs from the goods they produced. The diversity and repetition of needs brought about by division of labour, in this form, subsequently led to various ways wealth is circulated in the society.

The wheat producer confines himself to the production of wheat, and defrays his requirement for wool by carrying a quantity of wheat - in excess of his own requirement - to the wool producer who has a need for it. He hands over to the wool producer the required quantity of wheat and receives from him, against that wheat, the quantity of wool he desires.

We see in this manner that the wheat producer is directly connected with the consumer of his product. Likewise, the shepherd who produces wool gets in contact with the wool consumer in the circulation process without a medium of exchange. In this model, a producer of a commodity directly exchanges his production output with another person who is a producer of the commodity that he wishes to consume.

The process of circulation evolved in a variety of ways. At one stage an intermediary exists between the consumer and the producer. The wool producer does not sell his wool directly to the wheat producer as in our previous example. Instead, he finds a third person that plays the role of being an intermediary between them. The third person buys the wool not for his consumption, but to hold it for subsequent sale to the end consumers. Therefore, instead of the wheat producer having to find the wool producer initially, he meets this intermediary who markets the wool and agrees to purchase the wool. This is the start of the commercial operations. Later, it was the intermediary who frequently transacted with the producers and consumers.

In light of this background, we learn that in both types of circulation - whereby ownership changed hands either by way of producer-to-consumer exchange, or by way of producer-to-merchant-to-consumer trades - a work of production was done on the part of the person, who transfers the ownership of the commodity and receives the price for it. In the first type, the wool producer carries out the work of producing the wool himself and then transfers its ownership by selling it in consideration for a return. In the second type, the intermediary carries out the work of transferring the production to the market, keeping it and making it available for delivery to the consumer, whenever he desires it. This work is also a form of production as we have already learnt.

This means that the benefit or gain which a seller earns from the transfer of ownership (for a return or compensation) – and it is what we now call it profit – is the outcome of a productive work that he had performed, not an outcome of the ownership transfer itself.

But the mastery of commerce driven by selfish motives led to a change and deviation from its original form – of healthy, ethical and legally compliant trades – especially in present day capitalist era. That started the separation of both circulation and trading from production. Also, the transfer of ownership came to be an operation on its own, detached from any productive work on the part of the immediate preceding transferor. He now carries out the transfer for the sake of acquiring benefits and profits. While trade was (originally) the source of these benefits and profits as an extension of the production process, it later (at times) became merely a legal process for the transfer of ownership (with no really added economic value).

Therefore, we find in the capitalist trade that the number of legal (transfer) process multiplies in respect of a single property, resulting from the multiple intermediaries that exist between the producers and consumers, only to end up with numerous merchants having the opportunity to acquire gains from those operations.

Islam naturally rejects this capitalist-style deviation because it is contrary to true meaning and conception of trade. It is also against the Islamic view of trade as an extension of production as we have said above. Islam always treats and regulates issues pertaining to wealth circulation with this particular viewpoint. In matters related to trade contracts, the Islamic ideas adhere to a decisive course in the direction that rejects any detachment of circulation from production.

Doctrinal Evidence On The Islamic Conception On Circulation

The origin of Islamic conception on wealth circulation8 can be easily traced and it can be found in the doctrinal evidences in a collection of juristic prescriptions drawn together in the upper structure of the Islamic law. Among those texts that reflect this conception and states the Islamic view, is the letter of ‘Ali (a.s.) to his governor of Egypt Malik al-Ashtar. In that letter, ‘Ali (a.s.) lays for him a programme of work and specifies the Islamic concepts, and says: “Then admonish with kindness merchants, men of profession (artisans, industrialists) for the recommendation given and enjoin on them to do good – the resident among them, the one troubled about his wealth, the one who physically support - they are sources of benefits, the means for public convenience, the importers of distant things (products) from isolated dump places on your land, your sea, your mountain and your plan whence one cannot combine together and venture upon.”

It is obvious from this text that the trader class is placed on the same rank with that of professional men, artisans and industrialists and generalizes them in terms of all sources of benefits. Just as the merchant creates benefits, so do the professionals, artisans or industrialists. In the text that is followed with the explanation of the benefit or profit, which the merchants create and the operations they carry out - bringing goods from distant and isolated places, where other men do not jointly venture upon.

In Islam, trade is therefore a form of production and fruitful labour and earnings therefrom is the result of not only for an operation in the legal space (that results in change of ownership). This Islamic conception is not merely what the essentials of circulation denotes. It also presents the basis, in light of which, the (Islamic) State fills the legal gaps left to it to be dealt with within the bounds of its capacity as hinted earlier by us.

The Juristic Leaning That Reflects This Conception

As for the prescriptions and legislative enactments, which reflect Islam’s conception of circulation (of goods), we can find it in a number of juristic texts and jurists’ opinions. Some are given below:

1. In the opinion of a number of jurists like al-’Umani as-Saduq, ash-Shahid ath-Thani and others: If a merchant buys say, wheat, but has not taken it in his possession, it will not be permissible for him to make a profit by selling it at a higher price. But it will be permissible for him after he has taken possession, even though in the Islamic jurisprudence a legal transfer is completed with the execution of the contract and does not depend on any value-adding work thereafter. The merchant has already become the owner of the wheat even though he had not yet taken possession. However it is not permissible for him sell it at a profit at that stage. The intention (of the ruling) is that profit should be linked with work, as also to prevent more trades being merely legal transactions as cover for profit. There are a number of traditions in which this opinion is indicated:

In a report by ‘Ali ibn Ja’far, it is stated that he asked al-Imam Musa ibn Ja’far (a.s.) in respect of a man who buys food. “Is selling it permissible before he take possession of it?” al-Imam replied: “If he makes profit then it is not valid before he takes possession. But if it was by way of tawliyyah, that is he sells it at the same price he purchased, without any profit, then there is no objection. “

2. In the opinion of al-Iskafi, al-’Umani, al-Qadi, Ibn Zuhrah, al- Halabi, Ibn Hamzah and many other jurists: “Even if a merchant purchases goods to take delivery at a different time and pays the price thereof forthwith, it is not valid for him to sell the goods - after the due date comes to pass - at a higher price before he takes possession of the quantity of the goods he has purchased. Now, if you purchase wheat from a farmer, and it was agreed with him that he will hand over to you the total quantity of the purchased wheat after a month, you paid forthwith the price, it is not valid for you after the passing of the month to sell it for more before you take delivery of the purchased quantity and avail of the legal process of the transfer for the sake of acquiring new profit. You can, however, sell the goods at the very price as you purchased it.”

Those who hold of this opinion rely on a number of traditions. It is stated in a tradition that Amir al-mu’minin, ‘Ali (a.s.) said: “He who purchases food or fodder to be given to him after a fixed time (deferred delivery), if its condition was not met with and cash was taken, then he cannot take anything but his principal, for, on this basis, he will do no wrong, and no wrong will be done to him.”

In another tradition reported on the authority of Ya’qub ibn Shu’ayb it is stated that: he asked al-Imam as-Sadiq (a.s.) about a person who sells in advance a quantity of wheat and dates for one hundred dirham, when the time is due, the man to whom he made the advanced sale comes to demand the goods he had purchased. The man tells him: “By God, I have not more than half of what I have sold to you. So if you wish you can take from me half of the quantity you purchased and half of the cash money you gave me.” He (al-Imam) replied: “There is no objection if he takes from him the money as he gave it, that is one hundred dirham.”9

3. In many of the traditions from the prophet there are prohibitions against going out to meet the caravans (of merchants) and city-dwellers selling for the desert-dwellers. It is given in the tradition that the Messenger of Allah (S) said: “No one of you shall meet commercially outside the city nor shall city-dweller sell for the desert-dwellers.”

Receiving or meeting the caravan of merchants means a merchant goes out of the city and receives the owners of commercial goods. He buys the goods before they enter the city and later returns to the city and sells the goods to the people. As for ‘the city dwellers selling for the desert-dweller’, it means that a city merchant takes charge of the village people who are advancing towards the city, carrying with them their fruits and milk products, etc. He buys from them and trades with them.

Clearly, prohibition against these two transactions bear the stamp mark of the Islamic leaning, which we are trying to establish. The prohibition is aimed at dispensing with the intermediary and the parasitic part he plays by standing in the way of the owner of the goods meeting face to face with the consumers of the goods, not because of anything except on the basis of hurling himself in between them. Islam does not welcome an intermediary in such a role, undertaking no productive element in the production operation and exchanging purely for profit.

Who Do We Produce For?

I wish to highlight the capitalist position with respect to this question. By comparison, we may ascertain the Islamic standpoint along with its unique features.

The Capitalist Position

In directing production, the capitalist system - guided by its economic doctrine - relies on the price mechanism. Price determines supply and demand in the free market. The free (laissez-faire) capitalist economic system is driven by privately owned businesses. These businesses are operated and run by individuals and are subject to their will and desires. Each person runs his business and plans his production in line with his interests and his desire to earn the maximum amount of profit.

It is the drive and desire for profit that conditions each person to his production and determines his level of activity. The movement of price in the market determines the profit. Thus, whenever there is an increase in the price of the commodity that his business produces, the business owner directs his attention to the production of that commodity in a larger quantity hoping to earn a larger amount of profit. It is obvious that in a healthy and sound market environment, the price increase of a commodity in the market reflects an increase in the demand for that commodity.

It is this price movement that capitalism holds to be the bond between production and demand, with the profit being an incentive for production. It is the price increase that attracts capitalist enterprises with profit, and it is the rise in the demand that leads to the price increase. Thus, production is eventually directed for the sake of consumers and adapted to their needs, which express themselves in the increase in demand and consequently, the price. In light of this, the reply by the capitalist system to the above question (who do we produce for?) is that production is undertaken for the consumers and is always connected with their needs.

Criticism Of The Capitalist Position

This is the conspicuous picture of the capitalist production or the nice image that the adherents of capitalism seek to showcase in order to demonstrate the evidence of the prevalent relationship between production and demand under the capitalist economic system. While this picture is partly true, it is unable to conceal the appalling contradiction between production and demand under the capitalist economic system. It does explain the various links between production and demand, but it does not describe the essence of demand. And it does not uncover the capitalist conception to examine this arbitrary acknowledgement of demand, dealing with it only by use of the price mechanism.

The fact is that demand as an interpretation along its monetary dimension - in the capitalist sense – overwhelms that of its human dimension. It captures only one element - that demand causes increase of price in the market. But that is a demand accompanied by purchasing power or the financial capacity to fulfil. As for demands that are not backed by the corresponding financial ability of alluring or tempting the capitalist markets – that is by raising the price of the respective commodity to for attract producers to increase output - they are neglected no matter how desperately the goods are needed. Even if a consumer completely and persistently expresses his demand for a commodity, he has no right to ask for increase in production without demonstrating the evidence of his financial capacity to pay. He does not have any say in the capitalist economic life, even if it springs from the core of human reality and desperate needs.

No sooner did we learn this capitalist conception of demand, those golden ideals that the supporters of free enterprise wrap the capitalist production with - which they claim to conform to the wants and needs - dissipate all at once, because only the purchasing power of the fortunate few increases, while that of others declines. The level of wellbeing for the great majority of the individuals in the capitalist society has declined. From the capitalist point of view, the outcome of this considerable disparity in purchasing power would be that the demands backed by enormous purchasing power would command an exclusive influence over the direction of production. The will and desire of this elite group with the incentives of higher prices lure the owners of the respective businesses. At the same time, the need of the ordinary people is neglected for their lack of purchasing power.

A demand backed by enormous purchasing power will be able to get the capitalist market to produce both products of necessity and those of luxury for amusement and indulgence. Meanwhile, the demands by the poor will be unable to attract the production of even absolutely basic necessities of life. The system will results in the capitalist businesses enlisting all their resources and employing them towards production of luxury goods.

In response to this greed and over indulgence, a variety of devices and products have been invented because of the endless demand for enjoyment of goods and pleasure. The demand for items of necessity from a far broader base of the population among the ordinary people - for maintenance of life - continues to remain unattended to, except within the bounds of their financial capacity. In this way, the capitalist markets are filled with a variety of luxury goods and products for leisure, with occasional shortages of the basic necessities for a section of the population.

This is the position of capitalism in respect of production and the market mechanism that it relies on in determining what product and how much to produce.

The Islamic Position

As for the Islamic position, its essence can be described with the following points: -

1. To satisfy the basic needs of all members of the society, Islam makes it obligatory for the society to increase production to a level whereby the quantity of the commodity are capable of satisfying those wants and needs. It has to be in a sufficient quantity, which would allow each individual to have his need met. Until the production level is increased to that sufficient to meet the society’s total needs, it will not be legitimate to direct the relevant forces of production to other areas of production. In Islam, the needs and desire – regardless of the corresponding financial capacity or purchasing power – play a positive role in determining the level of production.

2. Likewise, Islam also makes it obligatory that the society’s production does not lead to extravagance. Overindulgence and excesses are forbidden in Islam, whether it is private expenditure by a person or a public spending for the society. It is also forbidden (in Islam) for one to wash the ground of his house with expensive perfumes, since it is extravagance (israf). Similarly, it is forbidden for the society or – in other words, the producers of perfumes - to produce more than the need of the society and its consumption capacity, because excessive production is a form of waste of wealth that is not justifiable.

3. Islam allows intervention by the Imam in production, with justification on the following grounds:-

First, to enable the state to set the minimum level of production of necessary goods and also the maximum limit, beyond which it is not permitted to further produce. It is clear that the running of private businesses driven solely by the will and desire of their respective owners, without any restriction by a central authority will lead to some difficulties. In some periods there would be overproduction and wastages, while in other periods there would be underproduction and shortages. A certain level of state supervision would assure that the society’s production runs its course within the desired limits.

Second, to authorize the state to respond according to exigencies of circumstances in areas, which the Shari’ah stays silent. This zone includes all types of permissible activities. The head of the state (Wali Al-’Amr) has the right to intervene in any of these activities in pursuit of the overall goal of the Islamic economic system. We shall give details about this area of activities and the limits of the state’s authority and its role, in our future discussion. This authority conferred upon the head of state to supervise and intervene in production, by deciding on the relevant aspects in the areas the Shari’ah is silent, is part of the state’s rights.

Third, the Islamic legislation concerning the distribution of natural assets provides room for the state to intervene and supervise the entire economic life. The Islamic legislation in this respect makes direct labour a basic criterion for the appropriation of natural assets and the acquisition of their ownership according to juristic statement mentioned in some of the upper structures of Islamic law discussed earlier. This makes it impossible for an individual to establish a large operation that monopolizes natural resources despite his capacity to invest. Thus, production in relation to minerals and natural resources are to be carried out under regulation by the state authority. Large state-owned enterprise can be established for efficient production of these natural resources and to place them at the service of the Islamic nation.

Through an effective and complete supervision over the mining industry and the production of primary raw materials, the state would have an indirect control over different fields of economic activities since in most instances businesses are dependent on natural resources and raw materials for their operation. It will thus be possible for the head of the state to access various economic fields indirectly by way of control over the earliest and most basic stage of production, that is, the natural resources and primary materials.

• 1. See Vol.2, Part.1, Second Chapter under The Theory of the Pre-production Distribution.
• 2. See Vol.1, Part 2.
• 3. The Machine Age refers to a period of time in the early 20th century from approximately 1880 to approximately 1945. During this time, new machinery was invented and production increased. [Note of Al-Islam.org].
• 4. See Iqtisaduna Vol 1, Part 2.
• 5. See Iqtisaduna, vol.1, Part 1.
• 6. See Iqtisaduna, vol.1, Part 1.
• 7. In traditional term, production is creation of a new utility (of an object). We have chosen this definition of production because those who know it in the other form ended up with meaningless generalization. They interpret ‘utility’ as a property of an object that enables it to fulfil the respective need or requirement. They say it is not an intrinsic or extrinsic aspect of an object, but is born merely by the desire for it, even if this arises from a false or erroneous estimation of the object. For instance, the desire for certain medicines may arise from a misplaced belief in its effectiveness in the protection against infections or diseases.

  The definition of production and utility of an object in this form includes a person’s work at convincing the public with regard to the usefulness or effectiveness of a particular product - because it creates a new utility and leads to that product enjoying the feature of satisfying the general desire - despite the reality that the person did not perform any work on the substance. This is the generalization that the traditional definition sustains. Therefore, we define production as the process of changing or remaking nature and natural assets in line with man’s needs. By this, we mean that production is a work that creates benefits that perform a role and fulfil a need.

• 8. We had better associate this conception with Islamic juristic leaning as against the Islamic legal prescriptions.
• 9. These texts point only to the law directed at prohibiting certain practices; forbidding the buyer from selling in advance whatever he purchases, before taking possession - after the due date falls - at a higher price. But if the texts (were taken to) mean an explanation of what a buyer can demand in the event the contract is breached, as regard to his legal options resulting from the failure of the seller to deliver within the given time, then the meaning of the prohibition in that respect will be that if the goods which the buyer purchased in advance are not delivered to him within the given period, and the contract is cancelled, then he has the right to recover – at the same price that he had paid to the buyer beforehand. On this supposition, there remains from the texts rulings as regard to the prohibition against selling it at a higher price before taking delivery.