Basic Precepts of Islamic Economics and its Dynamics

Islam postulates its economic philosophy and theory with cosmological orientation. It is a cosmic fact that the universe and all the living and non-living beings in it obey inviolable laws of its Creator. So, Islam demands human being to be in communion with the mainstream of the nature and the universe by surrendering voluntarily his will to the will and law of God in the realms of the life where he enjoys freedom. This is how Islam is defined in a nutshell. Both the term Khalifa (Vicegerent) coined by the Holy Quran in order to define and describe human being’s status and position in this world and the word Khilafat (Vicegerency) used to introduce Islamic socio-political and economic system symbolize the necessity of unconditional obedience only to Allah and compliance with His laws and precepts.

By P.P. Abdul Razak

Islam postulates its economic philosophy and theory with cosmological orientation. It is a cosmic fact that the universe and all the living and non-living beings in it obey inviolable laws of its Creator. So, Islam demands human being to be in communion with the mainstream of the nature and the universe by surrendering voluntarily his will to the will and law of God in the realms of the life where he enjoys freedom. This is how Islam is defined in a nutshell. Both the term Khalifa (Vicegerent) coined by the Holy Quran in order to define and describe human being’s status and position in this world and the word Khilafat (Vicegerency) used to introduce Islamic socio-political and economic system symbolize the necessity of unconditional obedience only to Allah and compliance  with His laws and precepts. This terminology of Vicegerent (Khalifa) implies the obedience of human being to Allah as a person, a society and a state in terms of his status as vicegerent of Allah and it corresponds to the very definition of Islam and is complementary to it. It is the same terminology of vicegerency that Holy Quran has used in order to define the relationship between human being and God in the realm of property and its acquisition.

From Islamic viewpoint, human being does not have ownership in his property whether it be by the individual or by the society or by the state. This perspective corresponds with the nature of the human life on this planet. Human being does not bring anything with him while he is born and does not take with him anything while he is died. Human being does not have ownership either even on his life or body or soul. How such a being having no ownership in his own being and life can own something which does not even belong to him. So, from Islamic point of view, no individual or society or state does have right of absolute ownership on the property. Islam redefines the relationship between human being and the property from a different level. Let us ponder over the two verses from the Glorious Quran quoted below:

“Believe in Allah and His Messenger (Mohammad) and spend of that whereof He has made you trustees (within your capacity as vicegerent of God on this Planet). (Holy Quran: 57:7)

This verse implies and includes the following:

The real and absolute owner of the property and wealth is Allah who is the Creator and the Owner of the universe and human being itself.

Human being does not have a status and/or position different from vicegerency in the realm of his economy also.

Human being represents Allah in his economic activities also.

So, human being is responsible to obey and comply with Allah’s laws, rules and precepts in the realms of his economic activities as well. The deliberate violation in this regard will be contradictory to the concept of Tawheed (Monotheism) as defined and described by the Glorious Quran as it implies surrender of will by human being to the will of God.

Look into the second verse from the Glorious Quran:

“And you should not give unto the foolish your property which Allah has made a means of support for you.” (Holy Quran 4:5)

This verse implies and includes the following:

As far as property is concerned, the human society has got a collective responsibility. The three times repeated plural form of the second person in this verse stands for the society and one who reins its affairs.

Property is the basis of survival of human life on this planet. In this respect the entity (an individual, or a group of individuals or a society) who becomes the trustee of a certain property has got private representational right on it and the power thereof to deal with it accordingly. This will be executed by the respective entity under the strict and the collective supervision of Islamic state or social system.

In the event of the privileges of the private representational right violates the basic norms and precepts and upsets the larger social causes, it will necessitate the intervention of Islamic state in order to correct and put it in the right and the straightway so as to serve the larger social goals basically intended by the socio-political and economic system of Islam.

When we corroborate both the verses quoted above and correlate it, the fundamental economic law that can be deducted from it is this: The privileges an entity (an individual, or a group of individuals or a society) does have on the property it deals with it is that of a trustee under the strict and collective supervision of the society and the state.

Economic Law of Islam

Human Being and Nature

From Islamic perspective, everything is rich and abundant in this world. This is so obvious and plain for any beholder. Even though human being is the epicenter among the millions of genres of species on this planet, he is neither the biggest of all species, nor with the largest numbers, nor with the longest span of life, nor the first ring in the long chain of living species. The number of a particular kind of colorful birds of passage that flee from the southern part of America to Mexico at the advent of the month of December is 140 million. This is not the only kind of bird of passage from America. This is the number of birds that passes at the advent of December to Mexico from that forest only. There are birds that stay in America itself. There are other birds in northern, eastern and western parts of America also. In summary we can be sure that the number of birds in America is much more than that of its human population. Think about the fishes in the deep waters. The number of single kind of a fish itself will be much more than the number of human population on this planet. Ponder over the different kinds and huge sizes of the water creatures. Do we observe any kind of dearth or deficit in their food that threatens even their existence and survival? Look into the two Quranic verses which point towards this fact:

“And so many a moving (living) creature there is, that carries not its provision! Allah provides for it and for you.” (Holy Quran 29: 60)

The quintessence of this verse is that since Allah is the provider for both human being and all other species on this planet, how the nature can be scarce and impoverished for human being only while it is affluent, opulent and abundant for all other species?!

Another Quranic verse mentions that the provision of food to all the species including human being for its existence and survival as Allah’s responsibility:

“And no moving or living creature is there on earth but its provision is due from Allah. And He knows its dwelling place and its deposit (in the uterus, grave etc). (Holy Quran 11:6)

The Prophet (PBUH) said looking at the birds nuzzling at the dusk: “Behold! They went at dawn with empty tummies. They came back to their nests at dusk with the overflowing bellies.”

As far as an observer is concerned, it may be a paradox to see the nature so abundant for all those species, either only herbivorous or only carnivorous and with very limited means while it is depicted so scarce, impoverished and insufficient for human beings, the only omnivorous creature on this planet, who consumes all those species and flora and fauna as his resources. In fact, human being simply finds fault with the nature and its Creator for his own mismanagement and malpractices. Human being occupies only 23% of earth space with other creatures which he consumes along with the 77% of the vast resources from the water as well.

Now consider the phenomena of air and sunlight which are indispensable for the very existence and continuity of human life on this planet and at the same time are beyond the realm of human management. Do we experience any kind of dearth or scarcity in it? Have we ever encountered such a scarcity in human history? If not, it is the same God who has provided us air and sunlight that has set this earth as our living planet and provided us other resources also. So, there doesn’t arise the problem of the earth and its resources not meeting with the needs and requirements of the humanity provided the human being complies with the laws, rules and precepts of Allah, the provider of the air and the sunlight, in all the fields and realms of life where he enjoys the freedom. Human being should admit the fact that source of his guidance is the same that of wonderful instincts of other species. Holy Quran uses the word Hidaya (Guidance) both for wonderful instincts of animals and for the divine guidance given to humankind for leading their life in the realms where they enjoy freedom. (Holy Quran 20: 50; 87: 3). It means that the divine guidance given to human being through the Prophet is as unique, impeccable, flawless and wonderful as the instincts that human being observes in the animals with so much of amazement and astonishment. Even though it may be different in its nature, the means of instinct in the animals is a kind of inspiration (Wahy in Arabic – Holy Quran: 16:68). Holy Quran uses the word inspiration (Wahy) for the process pressed into service for giving divine guidance for humankind through the prophets. The philosophy of this parallels is very clear and simple. The authority to give guidance in the realms of life where human being enjoys freedom including his economic life is for the same authority who has given the wonderful instinct to all animals. So, the Islamic system which springs from the divine guidance is as wonderful, unique, impeccable and flawless as animal instincts. It provides the abundance that of the air and transparency that of the sunlight. It is so beautiful, integrated and indivisible as the universe is. Because, it is the human facet of the system of the universe and it is the human system with the visage of the nature.

Islamic Economy & Acquisition of Wealth

The duty of giving Zakat and taking it with force arises when a person acquires wealth in a certain extent. So, the Islamic economy which focuses on the decentralization of the wealth through various means and balanced distribution of it among the society teaches, even before the ways of distribution and exchange of the wealth, the just and lawful ways of its acquisition. Zakat is not the name of process of purification of the wealth that has been acquired unlawfully and unjustly. “Tomorrow in the Hereafter life, no human being’s feet will move ahead in the Divine Court of Allah until he has responded to the five affairs,” Prophet taught the believers. Out of these, there is only one question about four affairs. “Span of life, what did you with it? Health, What did you do with it? …” But when it comes to the wealth there are two questions that we have to encounter: The first question is: “Where from and how did you acquire it?” And then comes the second question with regard to the wealth: “How did you spend it?” Islam curtails and controls “freedom to” acquire and earn through its moral prescriptions in order to safeguard its citizenry’s “freedom from” exploitation, cheating, deception and looting. It understands that the concept of freedom devoid of right to justice relegates it into a tool for exploitation.

In another prophetic saying Prophet describes a person whom the common people consider as “pious” while they see him praying lonely in the desert. He does wear all the features of piety as a mask. Prophet said: “His water that he drinks has been acquired unlawfully, the food that he eats has also been earned unlawfully and the clothe that he puts on also has been collected unlawfully. Then how his prayers will be accepted?!” This means that God won’t accept even the prayers from a person provided his socio-economic life is not set in line with the orders, instructions and commandments of God.

Zakat is neither a license to acquire the wealth unlawfully nor a mean to purify the wealth unjustly acquired. Zakat liberates the person from the evil mentality of worship of wealth, avariciousness, greed, jealousy, parsimoniousness, selfishness, narrowness of mind and miserliness and it inculcates in him mentality for sacrifice, generosity, awareness about others rights, social cooperation and philanthropy. Through Zakat, Wakf and other such means Islam wants human beings not to be self-centric. Islam promulgates that economics is not only a matter of science but of morality also. It is as cultural as civilizational. It has got relationship both with technology and spirituality. It needs to be looked upon not only through objective analysis but has to be directed with normative moral prescriptions also. That is why it has been given the name of Zakat which means purification in Arabic. Holy Quran says, “Take sadaqa (zakat) from their wealth in order to purify them and sanctify them with it” (Holy Quran: 9:103). The pronoun “them” in this verse denotes that Zakat purifies the mind and life of the person who gives the Zakat and not the wealth of the Zakat giver. If at all Zakat purifies the wealth, it is only in the sense that Zakat prevents the wealth becoming impure and unclean because of its mixture with others right and dues not given out through Zakat.

Labor & Compensation

Whether it be industries and/or business and/or agriculture and/or any other service areas, the first and preliminary way of earning and acquisition is the labor. As far as a Muslim, who believes that he will be questioned in the hereafter life about the way of earning and acquisition adopted by him in his mundane life, is concerned it is inevitable to asses and evaluate the job and coolie, the first and preliminary source of earning and acquisition, from Islamic perspective. He has to know distinctively about the lawful jobs and the unlawful jobs, the legitimate ways of earning and acquisition of wealth and the illegitimate ways of it. The Question of “How did you acquire your wealth” that Allah would be asking in the Hereafter life would include and would be directly related to what jobs he was doing in his mundane life. So, whatever be features the modern systems may have got or the circumstances the Muslims are in, all kinds of the jobs are not lawful to a Muslim. The running of prostitute dens, gambling centers, liquor bars or jobs directly dealing with interest or any other business that makes lawful of what has been made unlawful by Allah won’t be lawful way of earning and acquisition by any reason and leave alone the simple reason of it has been nationalized by any Government. The argument that we will be going backward again if we are not indulging in these kind of business is baseless. There are so many lawful walks and fields. Front running in those fields itself is sufficient to make us forward both socially and economically. We were leaders of the world while we had held our principle so firmly and our policies were so viable and flexible. Once we started to leave our principles behind us and became rigid in our policies, all the world knows in what a deep precipice the so called Muslim world is right now. And to look into this from another angle, Muslims progress and prosperity is simultaneously related to both his spiritual and mundane life. The so called “progress” in his mundane life cannot be at the expense of his spiritual and thereby hereafter life. The real progress of Muslims, as a person and society, relies upon to what extent he and/or they live in compliance with the law ordained by Allah. The moral as well as material deterioration deepens in proportion to his violation of Allah’s commandments. The Holy Quran says, “Thou are the superiors if ye are the true believers” It was so while we were true believers. And it will be so when we become true believers in its fullest sense and spirit.

Islam has got the loftiest and the most sublime vision about labor. The Holy Quran and Prophetic tradition see the labor as the conspicuous feature of humanity. “Verily, we created human being to toil.” (Holy Quran: 90:4)

“O Human being, you are toiling towards your Lord and you have to meet your Lord toiling as well.” (Holy Quran: 84:6). The Holy Quran makes distinction between human being (being-for-itself) and the universe excluding human being (being-in-itself) on the basis of responsibility that human being bears on his shoulders. (Holy Quran: 33:72)

Prophet Mohammad (PBUH) told, “The true believer passes away sweating his forehead (toiling and perspiring).” At another time prophet said, “You work for your hereafter life as if you are going to die tomorrow and you strive for your mundane life as if you are going to live on this earth forever. A believer in truth when he strives and pays efforts for his livelihood, he works taking into consideration of all the human being yet to come into this world. He considers himself only as a ring in the long chain of humankind. His sight is never limited within himself. He never can be self-centric and he never can withdraw into himself and not to consider the humanity. The Prophet (PBUH) again taught with regard to coolie of the laborer. “You give the reward of the laborer before his sweat dries up.” Furthermore, he again taught the employee is equal to the employer as far as food, clothing and housing are concerned. Again he mentioned, “Don’t force or compel your employee to do what is beyond his limit and capacity. If you ask him to do anything more, help him on it (by sharing the burden of the work and/or giving other monetary incentives).

Islamic Economy & Acquisition of Wealth

Incentives for the farmers

We can understand the incentives that Islam gives for the hardworking people from the disparities of the Zakaat it imposes on the crops cultivated differently. When Islamic State takes Zakat from the agricultural products, it takes only 5% from the farmer who cultivates it putting his or others labor. Cultivation putting the labour is much more different and broader than cultivation having economic expenses. One who does toil himself may not necessarily incur the economic expense. When you say that one who does not have economic expenses in cultivation should give 10% Zakat from his crops, it affects one who has tilled and toiled himself to cultivate his land. But Islam gives this incentive for the one who tills the land and toils in it. One who harvests his crops without toiling and depending only upon the nature should pay 10% of his crops being Zakat however much less he may harvest.

There is no Zakat on the land as it is the farmland.  In this regard Islam takes into consideration of relationship among land, tiller and labour. As per Islamic doctrines, a person who holds the land does have only conditional representative rights on it. The condition is to till and enliven the earth. The right of the person holding the earth depends upon the fulfillment of this condition. There will have strict and vigilant supervision of Islamic state in putting this representational rights in order. In this way, the Islamic State is obliged to give the products to the tillers who acquire representational rights on the land by toiling in it. The Prophet (PBUH) taught: The land is for one who enlivens it i.e. for the tiller.” This saying denotes that the representational right on the land springs from the labor he puts on the land. Another saying of the Prophet (PBUH) makes this notion more clear: “One who leaves a piece of land barren for three years, it will be confiscated from him and will be handed over to one who tills it and toil in it.” This means Islamic state has got the authority to take over the land property from the trustee if the same is not tilled and cultivated for the agricultural purpose for a certain period of time. The purpose of this rule is to persuade the land trustees to do the agricultural activities on the land under his trusteeship. As per the Islamic rule, no land can be left barren and uncultivated for a long time.

This law works in the following levels:

This is an incentive for one who tills the land and toils in it. He does not need to give Zakaat on land which is part and parcel of his capital. This is because nobody has got representational rights on the land in its absolute sense. It is provisional and conditional to tilling and toiling in it. This works as an incentive in the farmer to toil in it. Islam balances this disparity in proportion of levying zakat on other sources of income in other ways. In other sources of income, when Islam levies 2.5% each year, it repeats every year while in the case of crops it levies 5% or 10% zakat only one time  and only at the time of harvest.

A warning to the persons who leaves the land barren. If he leaves it barren three years consecutively, the land will be confiscated and handed over to the farmer who tills and toils in it. This will motivate all the farmer who likes and loves the land -especially in the background of the incentive Islam gives to him- to pay perseverance.

The influence of the concept of conditional representational right will reflect most in the quantity of crops harvested. The uncultivated land will become so minimal to the extent of zero. In order to avoid additional 5% of levy in Zakaat, the farmers will be motivated to work hard.

There will be increase in the production of food crops. This will help to avoid the dearth in the food. This approach of Islam towards land will help to eliminate the blood sucking feudalism.

The Holy Quran uses the word “maal” (wealth) in order to denote the surplus income a person earns through a lawful job he does after meeting his basic necessities and basic necessities of persons he is liable to take care by law. The income other than from the agricultural products is calculated annually. This implies the following:

An accounting system is not only the necessity of business and industrial establishments. On the contrary, all the members in an Islamic society should record their income and expenditures and has to take a balance sheet at the end of the year to calculate Zakaat and entrust it at the responsible official of the Islamic state. The Holy Quran has mentioned the necessity of recording even the loans.

Each person should have a financial year. A year, generally speaking, is a period that covers a person’s problems and difficulties both short term and long term. A system and the way of life that pays so much stress and emphasize on humanitarianism has to be able to look into its citizenry from humanitarian point of view also and not from economic viewpoint only. So, the period of one year in calculation of Zakaat and levying it cannot be shortened except in some cases of incomes which Holy Quran and Prophet’s tradition has exempted. The reasons why Holy Quran and the Prophet’s tradition exempted Agricultural products from One year consideration is the following:

Agricultural products, most of them, are food stuff which human being needs to consume daily. If its Zakaat is not taken at the time of its harvest itself, it will create dearth and difficulties for the beneficiaries of it.  Islam wants to avoid hoarding, black marketing and adulteration. Islam allows the farmers to give his Zakat as product itself. Islam wants to prevent and control the possibility of hike in the price of food stuffs due to dearth of it.

Unequal Opportunities and Comparison between Theory of Surplus Value & Islamic Law of Surplus Income

After putting the checks and balances through the strict laws and moral prescriptions related to earning and acquisition of the wealth which help to avoid the accumulation and concentration of the wealth within the certain sects of the society, Islam pays its attention to the balanced distribution of wealth among all. Islam sees that the main and root cause of the economic problems of the world lies in the unjust and lopsided distribution of wealth and its concentration within the rich and the elite class of the world. While describing the mode of distribution of the spoils and booties of the war, Holy Quran says its motto and goal with respect to wealth is creation of a social situation where the circulation of the wealth is not limited among the elite and the rich only.

How far Islam has gone in decentralizing the wealth is well epitomized in its law of inheritance. We see in it the most scientific equation and balancing between rights and responsibilities. Taking into account of responsibilities and obligations of the kith and kin towards the deceased and his/her off-springs, Islam distributes the wealth of the deceased person among many using the most scientific scaling and balancing system and thereby prevents the centralization of the wealth in a person and accelerates its decentralization.

The capital stone of the most important and fundamental approach of decentralization of wealth in Islam is its Law of Surplus Income. When we compare this law with the Marxian theory of Surplus Value, we might be able to understand from which angles Islam and Marxism look into the subject and how do they look into. I am comparing Quranic Law of Surplus Income which works as basis of  Zakat with the Marxian theory of surplus value only because it is the only theory available and worth of comparison in this respect. Moreover, you will find how glittering and feasible is the Quranic Law of Surplus income from the background of Marxian theory.

When a raw material becomes a finished product, the finished product acquires more value than the raw materials. This added value is called surplus value. The reason and basis for this surplus value is the strain and efforts put and paid by the laborer. So, Marxian theory of Surplus Value claims that the added value of the finished goods is completely entitled to the laborer who puts his efforts into the raw material. For example, when the wooden logs take form of a table, the difference between the prices of wooden log and the table is the surplus value. The surplus value is the result of the pains of the laborer who worked hard to change it into a table. Hence, he is the only one who has got the right to surplus value.

Before I compare this theory with the Quranic Law of Surplus Income, I would like to bring into the notice of the readers some elements that Karl Marx missed to take note of it.

Marx related the value of the product only to the labor or to the proportion of the labor put into the raw material. In fact, in our real life, it is not necessary for a finished product to acquire added value only because of the labor put into it. Neither it is necessary for a finished product to acquire added value in proportion to the labor put into it. The value of the finished good may not decrease only because of less labor. Instead of relating the labor with the value of the finished good and freeing labor from the clutches of the price of the product which is subject to the market mechanism, Islam asks the respective parties to determine the reward of the labor by mutual consent between the owner of the capital and the laborer and relates the reward of the labor with that mutually agreed upon contract between both parties. Furthermore, Islam asks the owner of the capital to pay the reward of the labor even before drying up his sweat or even before the completion of the contractually agreed upon period irrespective of the price and value of the finished product, surplus or deficit value it may have, and irrespective of the fact if the finished product is sold or not since Islam clearly knows that the price of the product conspicuously depends upon the market’s supply demand mechanism too. It is natural for the price of the finished good, whatever be its quality, to go down if the supply of it in the market is more than its demand. But this should not affect the mutually agreed reward of the labor. Sometimes the finished good may not get even the value of the raw materials. In some cases, it may become a dead stock. Marxian theory does not make it clear how such situations of deficit value will affect the reward of the labor. From Islamic perspective, whatever be the situation, surplus or deficit, the reward of the labor is to be mutually determined independently and apart from the value of the finished good. If the mutual agreement between the labor and the capital owner is to relate the reward to the value of the finished good and to share the surplus value as per the agreed upon proportion, Islam does not oppose it and says that both the owner of the capital and the labor will share both profit and loss. If the finished good has surplus value, they will share the surplus as per their agreement and if the finished good has deficit value, the capital owner will bear the loss in terms money and the laborer will bear the loss in terms of labor also.

Marxian theory of Surplus value is applicable in the production and manufacturing sectors. It is not relevant and cannot be applied to the service sectors. For example, it does not cover the income of the doctor who treats his patients.

Marxian Surplus value theory does not cover other sects of the society other than proletariat and the owner of the capital. For example, the people who are facing difficulties in meeting the two ends of their life on the account of they do not get the job, despite their worthiness and qualification, because of the intense competition in job market and the limited opportunities, or the people who are suffering because they have been unable to acquire enough education and/or qualification to earn a job, do they have any right in the income of the laborers and capital owners who thrive making use of  the same opportunities which are denied to others who suffer? The poor, the needy and the deprived are those who suffer because of lack of job opportunity for historical and/or sociological and/or natural reasons. Or they may have become unable to work because of physical disability or handicap. Or they have become poor because the limited opportunity has been denied to them. The rich got the opportunity to acquire wealth only at the cost and expense of the weaker sections of the society who were denied the same opportunity. Is there any dues and rights for the suffering class and the weaker sections of the society who were denied the opportunity because of the reasons mentioned above in the surplus wealth of the rich who thrive exploiting the same opportunities? Marxian theory is most silent on this part while the Islamic law of surplus income is most vocal here. Moreover, Islam, elaborating the right of Zakat, becomes a unique fusion of law and love, a kind of assimilation of force and mercy. Morally it is a kind of service and sacrifice on the part of the rich. But at the same time, legally and jurisprudentially, it is a kind of opportunity tax levied upon the rich in terms of the right of the deprived class in their surplus wealth.

Karl Marx who does not agree with the capitalist concept of private property ownership and who nor does agree with representational rights of the trustee on the wealth as Islam does, does not determine the role of the capital in the potential surplus value of the finished good. On the contrary, Islam gives the due rights to the trustee of the capital also looking into it from the perspective of representation.

Marx, as a human being, could not foresee the mechanization going to take place in the fields of production tools. So, the surplus value theory became unable to tackle and put up with the situation of conspicuous replacement of the human labor by the machines of the capital owners.

From Quranic perspective, the law of surplus income is the basis of Zakat. The law of surplus income by definition is the wealth a person acquires through a lawful job he does and/or through inheritance after meeting his basic necessities and basic necessities of persons he is liable to take care by law for a period of one year. Holy Quran unequivocally and clearly says repeatedly that the people who suffer from poverty because of the denial of the opportunity for various reasons and the people who have been given semi-opportunity but which does not suffice to make the both ends of their life meet have got right in the surplus income of others. This law correlates and corroborates with the social facts. Though opportunity is one of the blessings of Allah, it is created through the agency of the society and is limited. Even though everybody is equal in front of opportunity to seize it, they become unequal when it is availed or seized upon. Some thrive upon its seizure while others who are denied do suffer.  So, the rich thrives at the cost of the deprived. Everybody cannot become doctors or engineers. It is not only a matter of limitation of opportunity, but impractical also. That’s why we do develop a filtering process to select. Nor all of us can become business men and that also is not feasible in our real life. So, Quran says those who are unable to meet the two ends of life and suffer due to deprival of the opportunity have got a certain right in the surplus income of those who are able to thrive due to their seizure of the same opportunity.

“In their surplus income there is due right for the needy (the people who have been given opportunity but which does not suffice to make the both ends of their life) and for those who have been denied (all kinds of opportunities for various reasons and thereby become poor and the deprived).” (Holy Quran: 51:19). In the eighth verse of Chapter 70, we see Holy Quran repeating the same, Prophet Mohammad (PBUH) said: There is due right in the surplus income of the people other than that of Zakat. (Tirmadi)

The Arabic word “maal” in these verses have been interpreted as “surplus income” taking into consideration of the word “needy” (Arabic word “sael”) mentioned afterwards in the same verses.

The following things can be understood from these verses:

The needy (sael) who struggles to make both ends of his life meet has no surplus income (maal) with him and one who has got surplus income (maal) does not belong to the class of the needy who struggles to survive. So, “maal” in this context from Quranic perspective means surplus income after meeting the basic necessities of the life. This concept is supported and substantiated by the Prophet’s saying of “Zakat is taken from the rich and distributed among the deprived.” The measuring rod in terms of economic period to calculate this surplus income is and should be the same taught by the Prophet (PBUH).

The trustees of the surplus income were able to get hold of it because of the opportunities made available to them by the society. These opportunities were availed by them at the expense of those who have been denied the same opportunities for various reasons. So, the deprived classes have got due right in others’ surplus income.

Characteristics of Islamic Law of Surplus Income

The main characteristic features of the Islamic Law of Surplus Income are the following:

Islam is not ready to leave the weaker sections of the society for the market competition sitting passively and looking into their problems indifferently. It knows and understands that they have been denied the equal opportunities for various historical, social and natural reasons. It perceives why they have become unable to make both ends of their life meet. Quite different from the cruel and brutal capitalistic methods of making the weaker, the deprived and the backward classes of the society scapegoats of the intense competition by blatant misappropriation of the theory of survival of the fittest in the socio-economic realms which originally was expounded by Charles Darwin only in the areas of origin of species and their existence, Islam approaches the problem from humanitarian level. Islam recognizes the competition and understands it as the wheel of the civilization as well. At the same time, it does not want to ignore the weaker sections who have been pushed back in the intensive competition by and between the well to do competitors as well. So, it has determined certain rights for such weaker classes in the surplus income of the rich and forward classes of the society. Quran is the only book in the world which promulgates that “there is no restriction on the blind, the lame and the sick (and the like of any handicapped who cannot work as an ordinary person) if they eat from any house as it is their right.” (24:61)

Law of Surplus income, unlike Marxian Surplus value theory, is not solely dependent on the price of the finished product. On the contrary, it evaluates a person’s economic status using the measuring rods of both income and the time period. Through this, Islam says that it is the obligation of the trustees of the surplus income to provide the needy and the poor to meet their basic necessities of the life and Islam requires the state makes its own responsibility to ensure the protection of such rights. By fixing one year time period for calculation of the surplus income, Islam wants to take into consideration of short and long term economic problems of the trustees of the surplus income while assessing his/her economic status.

The Law of Surplus Income does not leave the right of the deprived to the market fluctuations or supply-demand mechanism. Islam wants to assert and establish the rights of the deprived independent of the market mechanism and over and beyond it.

The Law of Surplus Income is not related to rewards of the laborers and their rights only. It does not see the wealth as a problem only between the capitalist and the laborers. On the contrary, the Law of Surplus Income views the society from three levels. In order to categorize the three, I am taking liberty to coin some words with its definitions. The Needy (those who cannot make both ends of their life meet), The Meety (those whose income is just sufficient to meet their requirements of life) and the Addy (those who holds additional and surplus income after meeting their requirements of life). Islam through this categorization accommodates the poor and the destitute, the orphans and the impoverished, the deprived and disabled and those sects of the people who have been pushed back in to the doldrums of life because of social, historical and physical reasons and determines their right in the properties of the rich.

The right of the deprived in the surplus income of the rich will be distributed annually. It won’t be completed by giving it out once in a life.

The Law of Surplus Income does not discourage acquisition of wealth and becoming its trustees. On the contrary, it works as an additive and a catalyst in converting the saving into the investment. The rich who gives out the right of the deprived in their property every year cannot help thinking of channeling their saving into a kind of productive investment. This has to be looked upon from another angle also that Islam prohibits interest as well. The right of the deprived in the surplus income of the rich together with the prohibition of interest works as an effective catalyst in turning the saving into the investment and generating thereby the economic growth both in its micro and macro levels. Interest, apart from being a moral graveyard, is a dead end of an economic transaction whereas each and every economic transaction which Islam has made lawful ensures various streams of value chains and long cycles of diverse economic transactions. Apart from prohibiting the commoditization of money and renting it thereof which has no intrinsic and inherent utility entailing from its entity itself, Islam sees it abhorrent to extract anything additional on a lent and loaned (same thing given and taken back) thing since it does not create any other economic opportunity for anybody other than the lender while bartering and/or buying a thing (exchange of money or something with something else) creates long cycle of economic opportunities for the supplier of the raw materials, manufacturer, distributor, transporter, trader and buyer. Each of these clients has got its own cycles of economic transactions as well.

Both in principle and practice, Zakat is the right of the deprived in the surplus income of the rich. This is the one of the most important, strict and strong measures Islam adopts to ensure just and balanced distribution of the wealth among the people. It is the canal that has been dug in order to channel the flow of the wealth from the rich to the poor. But, we have to understand that in Islam, Zakat is not the only mean to realize this goal. As we have mentioned earlier, Zakat is the corner stone among its laws related to the definition of relationship between the individual and the property, its rules and regulations related to the distribution of land, its prohibition of interest and usury, its setting of checks and balances in an entity’s acquisition of wealth, its law of inheritance, its other laws related to economic transactions and the power it gives to the state to confiscate the surplus wealth of the rich in the event of the state sees it inevitable etc. Moreover, Islam has got social welfare and security schemes like Wakf and as mentioned earlier it gives unrestricted right to socio-economic security for the handicapped and the sick.

The Holy Quran once more makes it clear by elaborating the seven sects of the society who are entitled for Zakat. If we study those seven sects of the people deeply, we will understand that Zakat cannot be utilized in the developmental works of which both haves and have-nots are common beneficiaries of it. But it says zakat has to be utilized for the upliftment of the backward and the weaker sections of the society. For meeting the expenditure of governance and developmental works, government may levy other service taxes on its citizenry. Zakat is never tantamount to the service tax payable to the government and the one won’t stand instead of the other. For collection of Zakat, Islam uses both the means of piety and the force of the power. The Hereafter life awareness of the believers itself will work as a motivational factor in giving Zakat correctly and punctually. But, this cannot be expected from all. During the reign of Abu Bakr, when a sect of the people refused to give the Zakat, Abu Bakr encountered it using force. This makes it clear that, like all other socio-cultural and political laws, the power is indispensable for full and complete implementation of Islamic economic laws also. In addition to it, political and economic approaches of a comprehensive ideology of life cannot move into different poles. It is impossible to have an economic philosophy without a political philosophy. The economic philosophy of Islam is complementary to its political philosophy.

Dynamics of Zakat, A Sample Study

From the fixation of Nisab (the size of the income/wealth whereby Zakat becomes compulsory) and share of Zakat, Islam wants us to understand many things. An observer may feel that fixation of 2.5% as the right of the deprived in the surplus income of the rich so silly and trifle. This observation is superficial even when we consider it at micro level and at macro levels it is baseless as well.  Please see below just a sample study made on the usage of gold to understand the magnitude of socio-economic changes and impact that zakat makes at macro level.

Islam fixed 2.5% of Zakat on gold. The gold is basis of currency. So, the same percentage is applied on currency also. Gold is a metal which is not productive or which does not grow itself. Whatever work we do on it, it won’t help us to increase its quantity. Rather, it decreases in qty though it might appreciate in value depending upon market mechanism. Gold, as it is, is not used in the day to day life requirements of human beings. In Islam, wearing of gold is prohibited for men. In an Islamic society, gold is used only as ornaments for the women. Islam allows 84 grams of gold for each woman without Zakat. But, once the limit (Nisab) of 84 grams is crossed, 2.5% of zakat is levied on the total quantity of gold. Let us analyze the impact of Zakat levied on the gold in a society. For sample study, I have taken the state of Kerala (the most southern state in India) where from this writer is hailing. Kerala is the most densely populated state in one of the most densely populated countries in the world. Kerala is the most consumer oriented state in India. It is mostly agricultural though its spices have lost its glitter due to globalization phenomenon. Kerala relies mostly for its hard currencies on the export of man power. From all these angles, this writer feels Kerala is the ideal state to test new ideas since the ideas effective and feasible to Kerala could be feasible to the whole world.

The population of Kerala is 30 million. The increase in the population during the last 20 years has been 5 million. This means, 25 million people of Kerala are over the age of 20. Even though proportion of women is more than of men in Kerala, at least 12.5 million of women in Kerala are 20 years or more old. Age of marriage set by the Government for women is 18 years. Let us consider that 10 million of Keralite women are married at their age of 20 or earlier since we spare 2.5 million because of late marriage rampant among some sects other than of Muslims. Of course among these married, there are women who have got one or two kilos of gold. There are women who do not have even a single gram of gold. Let us consider 100 grams as minimum per capita consumption of the gold among the married women in Kerala. When we multiply this 100 grams with ten million women we do get 1000 million grams of the gold. The current price of the gold is $52 per gram. The total value of the gold stagnating in the wrists, necks and ears of the Keralite women is tantamount to $52,000,000,000. Imagine the economic impact if Zakat is levied on this gold. The annual share of Zakat on the above mentioned gold, irrespective of whether it be saving or converted into an investment, is $1,300,000,000. If we consider $6,000 (equivalent to IRS 250,000) is sufficient for economic rehabilitation of the deprived class, we will be able to rehabilitate economically at least 216,666 families (1,083,330 members since each family constitutes an average of 5 members) every year from the Zakat of the gold only. Economic rehabilitation of each family should be in a way that they won’t and shouldn’t deserve Zakat in the following year. Now let us consider the impact of Zakat in other areas of economy if it is levied and taken correctly and punctually.

$52,000,000,000 is the minimum value of the ornaments used by Keralite women. It is a kind of stagnated saving. The giver of Zakat will be forced to convert this stagnated saving into a kind of productive investment. Otherwise, there will arise a situation whereby he will forfeit his saving in terms of gold by giving Zakat every year especially in the context of prohibition of interest as mentioned earlier. So, Zakat works as a catalyst in converting this stagnated saving into a productive capital.   When we consider the capital of medium scale industries in Kerala between $3 million and $4 million and $30 million as the required capital for the large scale industries, we will understand that the capital for establishing 2 large scale industries in each of the 15 districts of Kerala (total cost is $900 million) and the capital for establishing 14,600 medium scale industries ($3.5 Million per industry) throughout Kerala is stagnating in the writs, necks and ears of Keralite women. This will give job opportunity for more than 1.5 million people (direct employment of 500 people in each large scale industry and 100 people in each medium scale industry). This helps to increase the productivity of the country and the exports thereof. This supplements the per capita purchasing capacity. The extent of cycles of economic transactions this will generate is unfathomable. When Allah levied zakat on gold, He might have intended all these healthy movements and transactions in both micro and macroeconomic fields also.

The sample study clearly makes it out the magnitude of the economic movements that levying Zakat only on the gold itself will make. Zakat is applicable for other kinds of savings also.  We have not yet calculated the 5% or 10% of Zakat of agricultural products in Kerala, nor have we calculated the Zakat of industrial and business concerns in Kerala. Again we need to calculate Zakat on bank deposits in Kerala. Now ponder over this. Kerala is the most densely populated state in the world after Bangladesh. Almost 700 people reside in a kilo meter square in Kerala. It can be said undoubtedly and unequivocally that an economic system that is effective for Kerala will be more effective for other countries which has got more resources and less density of population. The 2.5% and 5% of existing wealth itself which has been fixed by God, the Law Giver, is enough for eradication poverty from the face of this planet. The question is who will bell the cat?

Let me consider another example to gauge the magnitude of impact Zakat makes in an economy. I am taking the example now from India which is a developing economy. The registered value of assets of the big ten capitalists like TATA, Birla, Ambani, Vipro is $100,000 million (This is based on the latest figures). If we collect only 2.5% of their assets, this will be equivalent to $2,500 million which can be used for economic rehabilitation of the deprived classes. This is 2.5% of only ten capitalists in India. Consider the volume of Zakat that can be collected every annum in India for economic rehabilitation of the poor and the deprived taking into consideration of 2.5% of total bank deposits in India, 2.5% of all assets belonging to tens of millions of capital owners in India, 5% and 10% of agricultural products in India, 2.5% of value of gold ornaments worn by at least 350 million of women in India. This will help you to understand that the poverty is the progeny of human made system and is the byproduct of the mismanagement of natural resources by the human beings. The divine system promises and provides the abundance that of the air and the transparency that of the sunlight and the integrity that of the nature. So, in nutshell, Islamic economics is not about dealing with the scarce resources and unlimited human needs. Rather it is more about judicious distribution of the abundant resources available in our nature and tapping of it for meeting the legitimate needs of the people.

Berikan komentar

Pastikan Anda memasukkan informasi yang diwajibkan (*). Dilarang menggunakan kode HTML.