Money, morals and Islam

Timur Kuran is professor of economics and law and King Faisal professor of Islamic thought and culture at USC. He also is the author of "Islam and Mammon: The Economic Predicaments of Islamism."

MISTRUST AMONG Shiites, Sunnis and Kurds is only partly to blame for last week’s delay in drafting a new Iraqi constitution. Tangled up in the tension between sects and ethnicities is a fundamental ideological conflict between secularists and Islamists. To understand the constitutional battles, observers must grasp not only the principles of Islamic law, or Sharia, but also Islamic economics -- an esoteric modern doctrine that would befuddle Karl Marx, Adam Smith and even the Muslim jurists who, a millennium ago, developed the principles on which it claims to be based.

Secularist Iraqis believe that Prime Minister Ibrahim Jafari’s Dawa Party, Iraq’s largest and best-organized Shiite Islamist organization, aims to establish a theocracy in which Islam serves as an overriding, supra-constitutional source of authority. Overwhelmingly Arab, it leads the United Iraqi Alliance -- the “clerics’ coalition” that captured a majority of the seats in the post-Hussein National Assembly. Growing out of a diffuse movement of opposition to secularist forces -- the British in the 1920s, Arab nationalism and international communism from the 1930s onward -- it was formally founded in 1957 under the spiritual leadership of the late Mohammed Baqir Sadr, whose opinions remain a source of authority.

Until his fall in 2003, Saddam Hussein persecuted Dawa as a conspiracy bent on dragging Iraq back to the Middle Ages. His dictatorship is said to have killed hundreds of thousands of Dawa adherents. Yet it has never been clear what policies Dawa would pursue if it achieved power. Its leaders agree that Iraq should be governed under Islamic law, yet they are of many minds on what Islamization would actually entail.

Sadr’s intellectual legacy has facilitated the present ideological diversity. In his writings, Sadr laid out a vision, developed ideals and made sweeping predictions about the benefits of Islamization. He did not provide a blueprint for action, order priorities or grapple with the tactical aspects of social transformation.


Nevertheless, Shiite Islamists still consider him their leading authority on economic matters and the most gifted founder of “Islamic economics,” a school of thought that aims to restructure the economy according to Islamic teachings. Among Sunni Islamists, his reputation as an economic scholar remains limited because Sunni-dominated Islamic research centers in Arabia, Pakistan and elsewhere habitually ignore his works. Still, among today’s Islamist intellectuals, including Sunnis, Sadr’s economic works are viewed as the clearest expression of why an “Islamic economy” would outperform its alternatives. His ideas are often reiterated, though in the case of Sunni Islamists usually without attribution.

Sadr’s economic vision is developed in “Our Economics,” his masterwork published in 1961. The purpose of “Our Economics” is to discredit both capitalism and socialism as flawed and alien systems, offer Islamic economics as a vastly superior alternative and demonstrate that Islam harbors solutions to a panoply of vexing economic problems. In both capitalism and socialism he finds virtues. Islamic economics, he says, embodies all of these virtues while escaping their numerous vices.

An ideally operating Islamic economy would find a golden mean between personal rights and collective responsibility. Islam shares, Sadr says, the socialist goal of providing decent material opportunities to one and all. The difference is that it pursues this goal without trampling on basic freedoms or crushing individual creativity. In an Islamic economy, the state does not control every facet of an individual’s economic life. By the same token, it helps to limit inequalities rooted in selfishness and greed.

How is the golden mean to be reached? It will easily be found, Sadr claims, in a society infused with Islamic morality. In such a society, selfish and acquisitive impulses would be tamed, and the typical person would pursue material gain only within internalized limits imposed by Islamic ethics. This moral reconstruction would enable socialist egalitarianism to coexist with liberties characteristic of capitalism.


Most Islamic economists expect their readers to accept such thinking essentially on faith. Sadr aimed to convince broader audiences, including Muslims predisposed to think in categories rooted in secular ideologies. Inviting his readers to consider the challenge of preventing alcohol consumption, he observes that the United States failed at prohibition in spite of enormous efforts at enforcement. The fundamental reason, he claims, is that prohibition conflicts with a key capitalist tenet, the legitimacy of satisfying individual wants. An Islamic economic system would overcome alcohol consumption by liberating the individual from the preference for alcohol. The state would play merely a supportive role, and insofar as it resorted to compulsion, its policies would succeed by virtue of their harmony with the dominant ethos of society.

Personal restraint grounded in Islamic morality is Sadr’s answer to diverse social issues. Take poverty elimination, which a socialist society pursues through mandatory wealth transfers. Islam exhorts its adherents to assist the disadvantaged, and it teaches those of means to participate in a decentralized transfer system called zakat. In Sadr’s Islamic economy, the poor are fed and clothed largely through the voluntary zakat payments of believers seeking to draw closer to God. By the same logic, in this ideal economy every worker earns a decent wage because Islamic morality restrains employers from treating their workers unjustly. The state’s role in wage determination is limited to corrective measures. Inequalities that a capitalist state tolerates as the outcome of an invisible hand and a socialist state tries to lessen through an iron hand are limited through the guiding hand of God, working through both Islamic norms and leaders steeped in Islamic doctrine.

Like practically every other modern Islamist, Sadr considers interest illegal, in the belief that the Koran bans it categorically, regardless of form, purpose or magnitude. At the same time, he repeatedly praises the market mechanism, arguing that the pressures of supply and demand should be respected, not resisted. “Our Economics” seeks to overcome the contradiction through moral training aimed at removing wants liable to produce un-Islamic outcomes. If Islamic education makes people equate interest with unearned income, demand for interest income will disappear; hence, there will be no interest-based lending. People will lend to consumers suffering cash-flow problems without expecting a return. And they will lend to businesses on the basis of “profit and loss sharing” -- by accepting not a fixed return but, rather, a portion of any profit from the financed venture in return for part of any loss. By this logic, an Islamic economy may remain interest-free while respecting the market freedoms associated with capitalism.

Sadr’s economic agenda could not be put to the test in Baath-ruled Iraq. But similar agendas have been pursued elsewhere, most notably in Pakistan and Iran. Pakistan has prohibited interest, but its people have continued to give and take interest, usually disguised as a “bank fee,” “financial commission” or “service charge.” Voluntary zakat donations have been minimal. A government-run zakat system that requires the wealthy to contribute essentially at the rates of 7th century Arabia has failed to dent either poverty or inequality. In Iran, likewise, interest remains common, and there is no evidence of a reduction in poverty attributable to some distinctly Islamic policy.

In neither country have attempts at economic Islamization alleviated economic conflict measurably. Employers and employees have continued to differ over the morally just wage, and neither side has had trouble justifying its positions in Islamic terms. Likewise, clerics passing judgment on economic conflicts have disagreed among themselves. Instituting Islamic economic rules has thus proved to be anything but a mechanical process. Well-meaning interpreters of Islam, or of Islamic economics in particular, have encountered vast zones of moral ambiguity.

Such disappointments have led many Islamists to conclude that a properly Islamic economy cannot be attained without first improving the moral fiber of the average Muslim. Ambitious plans have been quietly shelved.

The Pakistani and Iranian experiments have shown that Sadr was right to treat the creation of “Islamic man” as a prerequisite for the ideal Islamic economy. These experiments also point, however, to the virtual impossibility of accomplishing a Sadrist moral transformation. If the moral fiber of Pakistanis and Iranians has not improved, as judged by Islamist leaders themselves, this is not for lack of trying.

For all the lip service Dawa’s current leaders pay to Sadr’s wisdom, they have given no indication of how they would succeed where others have failed. They have not elucidated what his teachings imply for wage policy or assistance to the downtrodden, to say nothing of policies on oil, the environment or foreign trade. Curiously, the Islamists among Iraq’s constitutional framers are drawing moral and intellectual authority from a man whose thinking is of no practical help in resolving Iraq’s vast policy challenges. The significance of Sadr’s intellectual legacy lies, then, less in the particularities of its policy proposals than in the justification that it provides for giving the Dawa leadership a voice in Iraqi governance, including economic policy-making.


Notwithstanding Dawa’s claim to provide a revolutionary economic agenda, as a matter of practice, Sadr’s legacy serves two political goals. First, it provides a manifesto for placing a clerical seat at Iraq’s national bargaining table. And second, it serves as a rhetorical device with mass resonance. At a time when most Arabs consider Islam under siege, a policy can be tainted merely by making it seem un-Islamic. A proposal categorized as un-Islamic will fail no matter how sound the utilitarian arguments in its favor.

Accordingly, secularist anxiety about Dawa goes well beyond the substance of its current policy positions. In the rough-and-tumble of Arab politics, Islamist parties will enjoy an advantage in any national debate by virtue of their ability to frame their own position, whatever its content, as uniquely Islamic and rival positions as evil.