A new study published today by the Institute of Economic Affairs examines the compatibility of the Islamic religion with free-market economic policies. Contrary to the concerns of many in the West, the study finds that the main tenets of Islam are not opposed to the key elements of a free economy such as the primacy of property, respect for family, the importance of nurturing business, enforcement of contracts and allowing individuals to trade freely.
Whilst some aspects of a free economy that was based on Islamic principles would look quite different from the main features of Western economies, there are no obstables in principle to Islamic societies being economically free, open and business-friendly.
The most important general principles highlighted by this study, edited by Imad-ad-Dean Ahmad and published in Economic Affairs, the journal of the Institute of Economic Affairs, are as follows:
- The fulfilment of contracts appears immediately after prayer and charity in the list of what defines righteousness in the Qur’an.
- Well-defined property rights, including procedures for recognition and inheritance, are basic elements of the establishment of a market economy. In Islam, private property is not simply recognised, it is sacred.
- The Qur’an encourages trade, prohibits fraud, and prohibits envy.
- The Western notion of “liberty” shares much with the Muslim understanding of justice, which includes freedom of religion and intellect (thought and expression).
- While parts of the Muslim world have some catching up to do with the West in terms of women’s rights, in the case of women’s property rights it was the West that lagged behind the Muslim world. The Qur’an guaranteed women rights of property and contract, and even a share in an inheritance, fourteen centuries before some states in the USA granted married women the right to property at all.
These principles have been applied in practice in the Muslim world – even if they are not universially applied today. For example, the parts of the study looking at Dubai, Turkey and Moorish Spain illustrate how the basic features of the market economy can exist side-by-side with a devoutly religious society.
Furthermore, the section of the study on entrepreneurship based on internet platforms shows how Muslims need not wait for domestic policy reforms in order to take advantage of business opportunities – trading online simply allows individuals and enterprises to bypass regulatory impediments. Finally, the substantial issue of interest on loans is addressed by a group of three Muslim scholars. Whilst the way in which Islamic finance bypasses the prohibition on interest is not uncontroversial, even within Islam, Islamic banks are thriving and using impressive self-regulatory vehicles to ensure that good business practice sits alongside the adherence to religious principles.
Writing in an environment in which respect for freedom of contract and property rights is being eroded in the Western world, the editor of the study concludes by arguing that: “harmonious economic development will require both Western civilisation and the Muslim world to recognise the importance of liberty, contracts and private property as universal values.”