Islam and the Political Economy of the Middle East - Case Study Example

Islam and the Political Economy of the Middle East “The development constraints and economic problems faced by Islamic countries have less to do with Islam as a religion, than they have with the general malaise of underdevelopment” 1. Introduction The Muslim World has been in conflict with the West since the middle ages all the way up until contemporary colonialism and imperialism in present-day Muslim societies. In the name of its culture, the West criticized Islam as propagation by the sword and held responsible for the underdevelopment in Muslim societies. Islam was said to be in opposition to progress, science and modern life. Theologians spoke of Islamic fatalism and predestination while philosophers made the Western culture the crest and the ideal of human being’s way of life. Is Islam really the source of economic problems and development constraints in the Middle East? Our research will attempt to clarify this issue by examining the relation between Islam and Capitalism, the role of Muslim institutions in the development of a modern state. We will conduct an analysis of Islam and the politics and economic behavior of Middle Eastern States. 2. Islam and the Political Economy of the Middle East 2.1 Islam and Capitalism Underdevelopment in Middle Eastern states according to Gregg and Matsumoto (2005, p.42), is analogous with the reality that most oil producing nations in the region are thinly inhabited. However, if a nation in the region is vastly populated, they either lack oil and other resources (coal, wood, minerals, etc.) to encourage industrialization. The region’s high rate of population growth that contributed to the 2.3 % decline in per capita GNP between 1980 and 1993, the most terrible performance of any region in the world is another source of underdevelopment. The direct consequence of this growth failure is escalating scarcity, unemployment, and social conflict. Another is the fact that many governments in the region became a ‘rentier states’, where economies are excessively dependent on oil, never tax their citizens, and providing jobs only through development projects and public services. The Muslim states economic real performance according to Murden (2002, p.126) epitomized the difficulties they are experienced in modernizing their local economic policies. The Middle East oil dependency is still strong while their economic performance is extremely pitiable particularly after the 1985 oil price crisis. Out of the numerous Muslim states, only Malaysia managed to move forward to attain the required economic and technical superiority to participate in the global market. Although they may seem modern, the Arab Gulf region’s affluence and development was exceedingly unstable as they are entirely reliant on oil prices. The possibility of going global is always open to the Arab states but they can never attain such prosperity for as long as their products and service are under authoritarian control, when foreign workers are doing most of the jobs for them, and economic growth is being restricted by the state. High oil prices may make these states very rich but their development will remain unhinged because economic progress cannot persist while political obstacles exist. Many believe that capitalism is applicable even to undemocratic states but sustaining it in a suppressed environment is a different issue. For instance, during the 1980s and years after that, Asian and South American countries liberalized their politics but countries in the Middle East stayed behind under despotic rule that prevented the birth of advance capitalism. In these authoritarian states, excessive capital was being spent on coercive capabilities, business people were excessively regulated, established and influential capitalist manipulate the local market, and workforce lacks the necessary skills and training. They are still attached to protectionism, fixed exchange rates, excessive states spending, and rent-seeking system of government. Muslim societies, Murden (2002, p.127) further explains are experiencing the anticipated economic drawback of being under a repressive system. This is because they have to support too many unproductive people. The issue that Islam is intrinsically anti-capitalist came from the widespread notion that liberty, democracy, rationality, and progress has no place in Islam. For this reason, Islam was being blamed for the backwardness of the Muslims and the vulnerability of the Muslim territories against military invasions. However, there is no evidence that these allegations are true particularly its impact to the region’s development. What we see here is the archetypal and assiduous endorsement of Western values they dominate and the postulation that advancement is associated with secularization and religion should leave the public alone (Ismail 2006, p.3). These kinds of criticism were also based to specific terms in Islamic law making their argument credible in the minds of some Muslim intellectuals (Binder 1988, p.210). For instance, Kuran (2002, p.36) asserts, “Islam defines a timeless, closed, and inadaptable economic system”. This means Islam itself with its unyielding law, is obstructing the reforms required to bring the region in stability. Islam is not a stranger to capitalism particularly in trade since ‘commandia’ is a form of transaction of goods for profit. Islam is also very accustomed with subcontracting and other local industry like the ‘bazar’ (Lane and Redissi 2005, p.107). The Muslims recognized both local and Western-style capitalism but they are also aware of the harmful effects of Western economic domination. Categorically, the essentials of Western capitalism are acceptable in Islam since a number of Muhammad’s supporters were successful merchants. In addition, he himself was making a living doing financial and profitable business during his time. More importantly, aside from historical occurrence, the Quran, Hadith confirms the right to private property, trade, and commerce (Esposito 2002, p.129). One criticism hurled to capitalism by optimist is its tendency to encourage self-indulging individualism and division among society. This is because capitalism tends to fragment people as they attempt to pursue their individual desires. In Islam according to Tripp (2006, p.53), the primary issue is not economic progress through capitalism but the threat of devaluing the significance of spirituality over materialism. Capitalism foster selfishness and insensitivity as individualism is inherent to capitalism. Individualism promotes erosion of individual values thus alienating an individual from society and creating a property system of isolated people (Tripp 2006, p.53). More importantly, individualism is a doctrine that can destabilize Islam’s moral underpinning because it teaches an individual to be sovereign from its social and spiritual obligations particularly his relation to God. Social fragmentation and division of a society into classes is another concern of Islamic social critics since classes signifies that people’s relation to each other are based on purely material obsession (Tripp 2006, p.54). According to Ahmad (2007, p.168), the variation between Islam and Capitalism is unambiguous. This is because capital in capitalist societies accumulates in the hands of a small number of influential people out of insatiability to gain more interest and is recycled into the economy with the purpose of gaining more profit than the current rate of interest as failure to do so would result in economic downturn. In contrast, any idle capital feared to wear away through the obligation of ‘Zakat’, those people with surplus savings are required to utilize it to earn profit in order to counterbalance the effect of ‘Zakat’. Harrison and Kagan (2006, p.268) explains that there is undoubtedly incongruity issues between Western traditional banking and Islamic religious doctrine. For instance, ‘riba’, ‘usury’, or interest in capital in any form is forbidden in Islam. In the 1970s, to encourage ‘interest free’ banking, the Saudi Arabian government founded the Islamic Development Bank. Many Muslim governments welcomed the effort as they have either directly funded the Islamic banks or permitted its establishments together with already established and much bigger traditional banking sector. These banks utilized assorted accounting and contracting methods to earn profits on their funds while circumventing the need to pay direct interest on investments. Consequently, to replace interest on principle with some type of profit sharing or leasing agreement, banking arrangements usually includes joint ventures, equity partnerships, and rental arrangements. Another distinction between Islamic economic policies and modern Western capitalism is the duty of all well off individuals to give a small share of their income to charity. The collected will be distributed to the poor and to institutions concerned with propagation of Islam like schools and mosque. Similarly, market institutions enjoy less restriction from Islamic law. For instance, in the spirit of goodwill, Koran encourages believers to trade and emphasized the significance of complying with their responsibility in a contract, private property, freedom of exchange, and security of contract. 2.2 Muslim Institutions, Capitalism, and Development of a Modern State Assuming that tough and disposed political power help disseminate an economic system, capitalism and socialism owed its extended existence from the United States and Western Europe. There is no known economic development outside the scope of capitalism and socialism because we are made to believe that there is no other alternative. Al-Buraey (1985, p.171) who made an analysis of the Western standpoint on economic development in Islam asserted that most scholars criticize Islam as an impediment to economic development. They held Islam’s negative frame of mind about material life accountable for the economic collapse of the Muslim world. They argue that the internal factors intrinsic within the socio-cultural nature of underdeveloped regions are the source of increasing underdevelopment. More importantly, they insist that the only road to development is adapting Western socio-cultural behavior (Hajjar 1985, p.4). As expected, scholars blamed Islam’s alleged fatalism for the Muslim’s diffident participation in world trade and economic development. They maintained that Islam obstructs a person’s creativity and productive business undertaking which they believed is the cornerstone of economic development. Furthermore, they also hold the long-established feudal composition responsible for the failure of homegrown capitalism to expand in most Middle Eastern states. This is because customary loyalties to rural affinity and ethnic alliance still exist in most part of the region despite significant resettlement into town and cities. In addition, they are never interested in investing funds to productive enterprises as they favored to invest in physical acquisition of lands and property that would only benefit their direct family and more distant relatives. This is because they think investing in industry as a personal risk and irresponsible considering the fact that such endeavor is regarded as ‘gambling’ the assets of the kinship group. There also much hesitation to accept business financing from banks or other equity investors since it could potentially take away management from the owner. Consequently, almost all businesses in the region depend on internal source of finance since they are owned and managed by a family (Wilson 1995, p.15). According to Mehmet (1990, p.76), through customary ‘quality-of-life’ indicators, we can effortlessly detect Muslim underdevelopment. Theoretically, fatalism and simple ambitions are typically linked to underdevelopment, which in turn lead to the belief that genuine Muslim favor the next life and avoid materialistic way of life. Therefore, the Islamic image of present life is denunciation of materialism, ventures, and any exertion aimed to augment human condition in favor of religious beliefs and fulfillment. The Western world’s common understanding is that Islamic ideology of family allegiance and the aged morality of religious loyalty is inherently antagonistic to economic development. However, this accusation cannot stand on its own since Western scholars failed to find any country in the Muslim world that base their overall economic development policy on Islamic ideology alone. They are persistently making a blunder in distinguishing Islam’s theory and ideology with the behavior and practice of Muslim countries. Occidental models theories and practice for development is omnipresent in modern Muslim states but only handful recognizes the characteristics of such concept and system. As a result, scholars tend to demoralize the Muslim culture and still attacking the same Islam, who supported and permitted the largest oil production in the world. Mercantilism and profit according to Hunter and Malik (2005, p.27), was already present in the early years of Islam. In fact, Islamic societies’ main interest during those days is to trade as Islam considers it an honorable profession. The connection between Islam and capitalism or any specific economic system Hunter and Malik (2005) added, “emerged as being largely questionable”. Fundamentally, the notion of Islam as anti-capitalist was nothing but allegory because Muslim societies’ apathy towards socialism has nothing to do with the laws of Islam. In fact, if we further investigate the accusation of fatalism and stagnation against Islam, Judaism and Christianity’s sacred writings have much more to rationalize the mind-set present in Islam. Clearly, the issue is not about Islam as anti-development because there is nothing in the Quran or the Sunnah to authenticate the allegation of fatalism and stagnation. To a certain extent, the issue is what type of development does Islam actually stand for, its ideological point of reference, and the process and systems for realizing such growth. In reality, Islam opposed capitalist and Marxist-Socialist oriented economic development and instead presenting its own unique solution. Islam is showing the world that capitalism in its Western or Socialist form is materialistic in character. The main objective of public policies in the Middle East is to construct an efficient and just economy to counter mass poverty and underdevelopment but it must be according to Islamic social justice. In sum, this is Islamic capitalism, a system in which the surplus created by economic development is not all considered as capitalists’ revenue but also helps support social justice and environmental conservation (Mehmet 1990, p.74). “Whatever impeded the emergence of capitalism in the Muslim world cannot be attributed to religious factors” (Ruthven 2006, p.164). It was much more of a socio-political crisis than a religious issue, which prohibited the self-contained development of capitalism in the Muslim states. This is because it was not the mind-set and principles intrinsic in Islam, which repressed the development of a capitalist economy, but the political standing of the merchant classes’ with regard to the governing military, bureaucratic classes in Islamic society. In terms of underdevelopment, Maoz (2006, p.577) believes that the strategic determinant of economic progress and underdevelopment in the Middle East is political configuration. This is because political decision and strategy has a salient consequence on the growth and underdevelopment of economics in the region since these oil exporting state economies excessively dependent on foreign trade and import of critical commodities including labor. Therefore, earnings from oil are mostly invested outside the country while local entrepreneurs and private enterprises are extremely restricted by government. Governments of Middle Easter states apparently failed to take advantage of the oil price escalation during the 1970s and 1980s while their dependence on imports greatly increased during this period. Consequently, in order to maintain economic stability and circumvent economic recession, they were forced to borrow when the price of oil plummeted in the late 1980s and the 1990s. 2.3 Religion, Politics and Economic Behavior In the West, severance of church and state is an essential feature of good governance. However, this is to a certain extent problematical in Islam because disparate to other major religions; Islam assigned Muslims comprehensive guiding principle for their economic and social scheme. The Quran, Sunnah, Ijima, and Qiyas are guidelines about competition, taxation, government funds, the activities of financial institutions, social and economic spending affecting poverty, income allocation, private possession, rule of law and inviolability of contracts, land occupancy, income policy, natural reserve management including diminishable assets, and heritage. According to Askari (2006, p.28), the elemental values of Islamic financial system can be recapitulate as capitalism. For instance, competition in trade, private property privileges with some limitations, economic advantage through hard work and ventures in investments, the privilege to get pleasure from his income and return on investments, and self-interest but with a number of significant qualifications. Islam in fact values self-interest as an essential element in its incentive-motivation system. It is essential to follow behavioral rules set by the system in any well-structured society. The most important thing to remember is the basic principle that welcomes capitalism provided it conforms to the fundamental goals of society, strengthen the social structure, and unswerving with Islamic social order and justice. Therefore, in the event that a significant segment of society requires adequate and equal economic opportunity or the basic human needs such as food, shelter, etc., the adapted capitalist system must give way. The people’s basic needs must take precedence over the well-organized and most industrious system of capitalism and the privilege of the rich. In short, Islamic economic system draws the line between doable and the impossible sending a clear message that adapting capitalism in Islam has its limits. Zubaida (1993, p.130) explains Islamic polity is characterized from its Western equivalent by the reality that the spiritual and the political community specified in the ‘umma’ is dissimilar to the Western severance between church and state. The reason for this statement is that history can explain all succeeding historical development. Therefore, it can enlighten us that the failure of Islamic states is due the reality that the idea of a territorial state with individualized citizenship, worldly law and doctrine of sovereignty is peculiar to the Muslim intellect. In fact, it is contrary to the political models of Islamic history since ‘umma’ knows no boundaries but recognize the notion of ‘dar-ul-islam’ that divide the domains of the unfaithful from Islam. The imported political replica and concepts of the nation state and secular political ideologies are peculiar to the citizens and governments and expected to fail in unreceptive setting. In some literature, Islamic economic system would provide economic integrity better than existing capitalist and socialist scheme. This is because an Islamic system would be free from abuse and relentless discrimination that exemplify capitalism. Moreover, it would be free of class resistance and unbearable restrictions that characterized socialism. According to Kuran (2004, p.103), Islamic economics did not surface as a subject in its own right until the mid-1960s. However, literatures concerning this showed no curiosity or admiration for the economic models and mechanisms developed in the past particularly in Europe and North America. However, there must be equality and fairness for a society to achieve economic justice and the concept of equality prohibits serious discrimination in the allocation of goods. Similarly, a society with some members living in extravagance while others are dying in scarcity cannot be considered Islamic. In the law of equality, economic gains are earned and people’s losses are justified. It requires the economic system to deal with similar economic contributions equally and dissimilar contributions differently. There should be absolutely no favoritism based on ethnicity or color or rank. The only measure of a man’s value is his disposition, skill, and service to humanity. In the same way, no economic unit should be deprived of its fair share in the national product. The theory of equality prohibits the allocation of wealth created by this practice from being hideously asymmetrical. “The principle of fairness, by contrast, requires the economic transaction, which determines the distribution to be fair” (Kuran 2004, p.103). 3. Analysis and Conclusion Underdevelopment in the Middle East invited various analyses ranging from sparse population to economic policies. Some scholars insisted that the problem in the Middle coming from the inability to modernize economic policies and excessive dependency in oil revenues, rent-seeking practices of monopoly, protectionism, and excessive state spending. Others blamed authoritarian regimes for inhibiting the birth of complex capitalism in the region. However, our analysis of the facts and opinions gathered seems to point us to one very significant direction. Everything has its roots and therefore there can be only one reason or explanation why the Middle Eastern states are suffering from underdevelopment. Given that no economic system can flourish without a tough and disposed political system, it is not right to assume that only Western style capitalism can bring development to the region. Similarly, it is not correct to assume that it is the only option available for the Third World or attached underdevelopment to Muslim’s alleged fatalism, low aspirations, and withdrawal from this material world in favor of the next life. This is because there is no country in the Muslim world that draws its total economic development policies entirely on Islam. The mistakes of persistently confusing the teaching of Islam with the practice and behavior of the Middle Eastern states seems to put the very same Islam that supported the production of large volume of oil that is now being enjoyed by the rest of the world, into an anti-development religion. Profit and mercantilism was with Islam and trade has been a core activity of Islamic societies since its early days. The idea that Islam is inherently anti-capitalist encourages fatalism, and inaction is therefore a myth because there was nothing in Islam’s teachings to support fatalism and stagnation. As we mentioned earlier, development is not necessary Western style, and therefore we should turn our focus to the type of development does Islam really stands for. Islam recognizes the danger of materialism at the center of Western capitalism thus; construction of efficient and just economy according to Islamic social justice is their primary goal. The surplus created by economic growth in Islamic style capitalism helps to promote social justice and ecological replenishment thus capitalist only gets a small portion of the profit. The Islamic economic system is free from exploitation and severe inequalities that characterize capitalism and therefore serve economic justice better than existing capitalist and socialist system. Moreover, Islam does not allow some of its members to live in luxury while others are in poverty. In sum, Islamic capitalism involves business competition, limited property rights, gains and risks in investments, enjoying the fruits of labor, return on investments, and self-interest as incentive-motivation. Islam is pro-capitalist for as long as it is consistent with Islamic social order and justice and therefore incompatible with Western style capitalism where the right of the wealthy and capitalist takes precedence over basic human needs. In essence, there are certain limits capitalism can be adopted in Islam. The assumption that “the development constraints and economic problems faced by Islamic countries have less to do with Islam as a religion, than they have with the general malaise of underdevelopment” is true in the sense that Islam is undoubtedly pro-development. Scholars seem to overlook the basic nature of the Middle East and oftentimes perceived the East as West. The Middle Eastern states are rich in oil but they do not have other natural resources like the West such as potable water, coal, minerals, wood, and so forth to fuel industrialization. Consequently, their lone revenues in oil provide the essential needs for their people and therefore have slower development than the West. Let us remember that Muslim in our history is synonymous with trade and Islam is very familiar with subcontracting and domestic industry. Islam has no problem with the essentials of Western capitalism and in fact, its founder was engaged in financial and commercial transactions to make a living. More importantly, the teaching of the Quran, Hadith, and Muslim historical experience encouraged the right to property, trade, and commerce. Islam is therefore not anti-development or anti-capitalist and the development constraints and economic problems being encountered by the Middle Eastern states have nothing to do with it. It is much more obvious that 4. 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