Book Review: Islam and Mammon; the Economic Predicaments of Islamism. By Timur Kuran

The twentieth century witnessed the popularization of the notion of “Islamic economics”, which is the idea that economics should be restructured according to the timeless principles of Islam. In his book, Islam and Mammon; the Economic Predicaments of Islamism (Princeton University Press: 2004), Timur Kuran argues that “Islamic Economics” is inherently illogical and largely inconsistent in implementation. Islamic economics has also failed in reducing poverty and inequality and raising production, innovation, and the quality of life. Kuran argument mainly focuses on the “genesis” of modern Islamic economics, the inconsistencies of the practice of banning interest and profit sharing, and the whole-scale failure of state administered wealth redistribution via the zakat.

There is no question that the twentieth century saw the rise of “Islamic economics”: the first full-scale Islamic bank opened in Dubai in 1975 (the Dubai Islamic Bank) and today there are Islamic banks in more than sixty countries (9). Additionally, during the latter half of the century several well funded research centers and journals devoted to Islamic economics were founded (1). This ascendancy of Islamic economics was not due to widespread desire in the Muslim world to reorder modern economics, but rather to the desire to restructure society under so-called Islamic injunctions and protect Muslim identity and culture. Accordingly, Sayyid Abul-Ala Mawdudi, the century’s first major proponent of Islamic economics, argued for Islamic totalism in response not to economic waning but to the weakening of Indian Muslims’ identity and culture in late colonial India (82-101). Thus, “the economics of ‘Islamic economics’ was merely incidental to its Islamic character” (82).

Not only are the theoretical foundations of Islamic economics undefined and therefore undefended, the practice of Islamic economics, is largely inconsistent with Islamic principles, one might even say that it is deceitful. For instance, in order to front that they truly ban interest, Islamic banks adopt practices such as murabaha. Murabaha means that the bank assumes risk for an often infinitesimal period of time of the resources that an entrepreneur, for instance, is seeking a loan to buy. The entrepreneur then buys the resources from the bank at a marked up price to be paid at an agreed upon future date. Thus the process from the point of view of the bank and the entrepreneur is equivalent to an interest bearing loan. Furthermore, the inconsistency of the practice of profit sharing is evident in that profit sharing is supported by interest based investments; Islamic banks “unofficially promise potential depositors returns no lower than the prevailing interest rate” (44). In fact, using data comparing the returns on savings deposits in Turkish banks, Kuran shows that the “ostensible interest-free returns of the [Islamic banks] essentially match the explicitly interest based returns of the [conventional banks]” (44).

Kuran is strongest in his argument that inconsistency and failure also abounds in the example of state administration of the zakat, one of the main tenets of Islamic economics. Zakat collection focused lesser important commodities, such as agriculture, mining, and precious metals, has failed to reduce poverty and inequality (110). Kuran’s analysis is replete with data from Pakistan and Malaysia that shows that disbursements to the poor are insufficient, with only fifteen percent of zakat collection going to the poor, amounting to between four and eight dollars per individual per month, while fifty three percent goes to “commendable measures” (often religious education) and twenty two percent goes to the central administration (24). Additionally, with large scale favoritism abounding, zakat collection often become regressive in nature. In the Malaysian State of Perlis, for instance, ninety-three percent of zakat tax incidence fell the agricultural sector, namely, on rice farmers, most of whom live in poverty (22).

While Kuran makes clear his critique of the modern day implementation of Islamic economics he does not give any sort of theological or exegetical defense of his critique. For instance, a critique of interest freedom in Islam necessitates exegetical defense of ones understanding of the Qur’anic concept of riba; Kuran avoids any such defense. A defense of Kuran’s theological position concerning economic matters is important for his challenging of the utility of Islamic as a foundation for economics. While Kuran gives an ambiguous explanation of his understanding of the relationship between Islam (and religion in general) and economics, without this theological defense of his position, he indeed implies that Islam is inherently detrimental to economic development, a very precarious, controversial, and presently unsubstantiated position. Thus, Kuran’s work is reduced to merely a complaint rather than a practical solution to individuals and societies that sincerely desire holistic guidance from Islam.
Labels: Islam