By Gulmina Bilal Ahmad
August 17, 2012
A free market economy has its own failsafe to handle unethical and corrupt practices, but the rule of law fundamentally holds the key to preventing such activities from taking hold
The subject is being frequently debated nowadays. Due to the rising inflation, especially of food commodities, whether the state should exert more control over prices. With the prices of essential commodities rising further during the holy month of Ramadan, the debate also brings in a religious perspective. Recently, I had the pleasure of attending a book launch of a study titled State Intervention in commodity markets: Discord between economic freedom and social justice in Islam by Ali Salman. The debate in the study revolves around whether or not Islam permits state intervention in the economy, especially in the case of price control. The writer has explained the concept of an Islamic economy and through his research has presented the view that Islam promotes economic liberty. He has reached the conclusion that price control and state intervention in the economy is not allowed under the Shariah.
Salman maintained the view that a free market along with consumer protection measures is the principle of an Islamic economy. The concept of the welfare state in Islam has been attributed to prosperous and responsible individuals rather than the state. The book provides a refreshing perspective over the discourse that has been ongoing since a very long time. As I have been studying the book, it has left a lot of questions and confusion in my mind regarding the subject being discussed. The confusion regarding this study not only pertains to the liberal perspective of a free market economy, but also concerns certain paradigms that were altogether ignored.
First, it may be my personal view but I disagree fundamentally with fusing religion with economics. Religion is a divine contract between an individual and a divine entity; it cannot be related to the overall subject of a free market. At the individual level, it might have a part to play within the economy, but imposing it on the entire functioning is not beneficial. The literature fails to explain the aspect where people who are not subscribers to an Islamic perspective are part of the market economy. Even General Zia had to introduce certain provisions for non-Muslims, during the implementation of Islamic laws. In my opinion, the book does not pertain to the secular argument of the free market economy, ignoring the fact that there are also communities from other beliefs contributing to the economy.
The other observation that I would make here is that in the second section of the book, the writer has based the discussion on ‘The general case of liberty’. Through a liberal perspective or perhaps any perspective for that matter, liberty is central to every activity. In a free market economy, liberty is core to its functioning, not a ‘general’ value. This dismissal of liberty to a generality might perhaps be a matter of semantics rather than of belief since Salman is a committed liberal.
An interesting observation that has been made by Salman is that “Islamic economics is concerned with the causes of poverty not that of prosperity.” This concept is close to the liberal view of economics that seeks to minimise the role of the state only to offer a level playing field to all economic actors and shield against exploitation. In other words, this is as close to the liberal definition of ‘public interest’ as can be. While I would have liked Salman to elaborate this point further, he chooses to restrict himself to this observation without any further engagement with the reader. One would have liked him to highlight that poverty is relative to the existence of prosperity. There is an inverse relationship between both and without the existence of prosperity the level or presence of poverty cannot be defined. The writer has left the readers hanging in a limbo, as the book is unable to clarify and explain this relationship.
On the subject of the role of the state, I was surprised that neither in the report nor at the book launch no one mentioned the importance of the rule of law. A free market economy has its own failsafe to handle unethical and corrupt practices, but the rule of law fundamentally holds the key to preventing such activities from taking hold. This also actually guarantees the minimum interference of the state in market activities, as the implementation of law will avert situations where the state has to take drastic measures for consumer protection. The checks and balances within the free economy make certain that all issues are resolved without government intervention, while the rule of law guarantees that the state only interferes when it is necessary to do so. There has been no emphasis on this particular aspect throughout the study. Unfortunately, a crucial and important aspect of economic liberty and state intervention was ignored. The scrutiny of the part played by the implementation of the rule of law would have presented a more interesting debate in relationship to a free economy.
Despite my views of certain shortcomings, this research has overall been a sincere and unconventional effort by Ali Salman, who has explained in detail the standing of free market within the Islamic ideology. He has also undertaken a historical analysis of economic liberty and the welfare state. This is a fruitful attempt to remove the misperceptions surrounding the free market economy, presenting it to be more in line with the historical, cultural and religious perspective. The effort should not stop here. Rather, it should be continued by other economists and researchers as well, so that a broader and an in-depth understanding of the free market economy prevails.
The writer is a development consultant.