The Thoughts & Ideas Of Al-Ghazali In The Field Of Economics & Economic Growth

Abstract

The Muslim world, as of today, suffers from the rise of the contemporary economic system adopted by the world. The vicious circle of poverty, inequality, inadequate resource distribution and the huge network of conventional financiers, working towards bettering the society by implementing an interest-based model in the economic system, continues to envelope the Ummah into trouble both financially as well as mentally. As a Muslim, I am not shy to highlight the façade under which majority of the Muslim countries are still operating i.e. the conventional economic and financial system. It is as if the system has been an innate part of the pre-modern day Islamic society.

The roots of the contemporary system have been ingrained into our minds so much so that the thought of switching to an alternate system based on the Quran and Sunnah (Shariah) seems like a farfetched idea. And even if the idea is plausible, the conventional apparatus of running the economy seems a more ‘trendier’ approach. Mufti Irshad (chairman of the Shariah Board at the State Bank of Pakistan) says, and I quote, “The adoption of either idea (conventional or Islamic) is based on how the people of the contemporary society perceive of a shariah compliant alternative. The solution lies in changing the thought process of the people.”It can be inferred from the mufti’s statement that the concept of Islamic economics and Islamic finance has been in existence since the time of our Prophet Muhammad (S.A.W). Today, Islamic economics is an ‘emerging and evolving discipline’ in majority countries since in recent times, Muslims have been exposed to the trials of western colonialism.

Therefore, the whole idea of an Islamic economy is perceived of as a totally new phenomenon. “The Muslim society of today is not yet a society on its own,” explains Syed Nawab Haider Naqvi. “It is still under the shadow of the Western system: and, as such, it is doubtful how ‘representative’ of the Islamic ethos its current behavior can be.” It is implied here that the contemporary practices might be not in line with the Quran and Sunnah. Nevertheless, the countless efforts of our ancestors in preserving the sanctity of the Islamic system has made it possible for modern-day thinkers, researchers and scholars to bring about a collective change in the conventional system altogether. One such important figure in the field of Islamic economics was Imam Al-Ghazali. His contributions towards the concept has been an enlightenment for many future Islamic scholars who were, then, to change the scope of the Muslim society in the years to come.

Introduction

This report discusses the views of Imam Al-Ghazali on the socio-economic policy that should be implemented in the Muslim society. In the contemporary financial markets, the presence of several administrative and supervisorybodies have not prevented the occurrence of many financial scandals and crises. This is,evident of the fact that that even strong regulation and supervision may be insufficient to ensure the stability and the soundness of the financial industry. The ethical behavior of the economic actors in the marketplace is indeed a pre-requisite to the stability of system. In this regard, it could be useful to investigate our heritage to see how previous Muslim scholars had dealt with the issues like what we are facing today to extract some lessons from their works.

Imam Al-Ghazali is one of the most prominent Muslim scholars who have contributed in Islamic economics.To build up the reader’s interest, the report first discusses the importance of Imam Al-Ghazali as a praiseworthy scholar in various Islamic disciplines. His importance will answer the question as to why I chose the Imam’s view on Islamic economics as a topic for discussion. This would be followed by an insight of Imam Al-Ghazali on Islamic economics and the contributions made by him in the field. The contributions would include any inventions, findings, modes or fatwas (if any) that were developed or thought out by the Imam. Details into the timeframe over which the said contributions were made would also be entailed alongside the report. A conclusion would then follow with a brief synopsis about the implication of Al-Ghazali’s views and ideas.

Importance of Al-GhazaliImam

Ghazali may have lived over 900 years ago but his research, work, analysis and thoughts are just as relevant and important today as they were in the 11th century. Ghazali’s brilliance can be attributed to the fact that his analysis of the people and the society was based purely on the teachings of the Quran and Sunnah. His quest for knowledge and his ability to break down complex and critical information to suggest a constructive solution helped him raise his bar.Imam Ghazali was born in 1059 AD near Tus in Khurasan, a part of the then Persia. These were the times, when Muslims were dominating Europe, Asia and Africa, however, because of new culture of these countries they were deviating from the true teachings of Islam.

The great educator of Islam was born at a time, when doubts were raised from various sides about Islam. Hence, it is he who came to the rescue. We can say that, in a way he was responsible for the revival of Islam. He is also known as Hujjatul Islam.Imam Ghazali mentions in his book Al-Munqudeen-al-Dalal, that he spent 38 years in the search of truth from place to place and studied different schools of thoughts of that time. Because of his knowledge, he was offered the post of head of the Nizamia School in Baghdad. This school was the center of attraction for scholars all over the world. However, his quest for knowledge led him to resign from this post after four years.

Imam Ghazali ’s skepticism kept overpowering him for another ten years, in which he wandered across many places including, Makkah, Yathrib and Syria.Imam Ghazali died in 1111 Ad having written several books including, “Revival of Islamic knowledge” (Ahya-e-uloom Islam) and “Incoherence of philosophy “(Tahafat-ul-filasafa)He provided a rational basis for the Islamic beliefs and integrated Sufism and individual beliefs, to give a holistic picture of Islam in helping to reunite Muslims of the world. People often criticize him for the lack of use of reason in Islam. As an educator, he is the greatest and most influential educators of Islam and has great influence on the modern educational thoughts.It is very much clear that the educational ideas of Ghazali are deeply affected by his religious philosophy and research. He thinks that the human mind is like a clean slate and the teacher can transform it with the passage of time. Plato and Aristotle also held similar views.

Al-Ghazali’s Thought and Contributions

Al-Ghazali, apart from being a Muslim philosopher, theologian and a mystic, was also well versed in the field of economy. His more focused work was his view on the implementation of ethical practices in Islamic finance and economics. Al-Ghazali believed knowledge and learning was a virtue, vital for the Muslims to adopt. He interpreted the notion of knowledge from an Islamic standpoint. The Quran places significance on the importance of human labor and generation of wellbeing within the Muslim society. This is exactly what Al-Ghazali’s concept of acquiring knowledge underlines. He argues that Islam asks upon humans to maintain a balance between desire and abstinence from material world to reach the inner content and awareness of tawḥīd. One does not need to sacrifice the pleasures of dunyā for the sake of hereafter, but rather to constantly bestow and bewilder the mundane reality.

Therefore, Al Ghazali seems to be an essential and indeed influential figure when it comes to economic thought and Islamic ethics. Ghazali’s economic philosophy is related mainly to the Islamic ethos of the Qur’an and the Sunna. Since contemporary Islamic economics are predominantly concerned with licit and illicit conduct e.g. what is lawful or unlawful according to Shariah, how should economic transactions be incorporated into the commercial economic system, how do Islamic banking system operates and other predominantly juridical-technical matters, Al Ghazali’s writings on economy is not only relevant from an Islamic perspective, but rather necessary in shedding light on ethics in economics, since intervention of ethical codes and interrelation with the moral conduct are missing in contemporary economics.Composition of the Islamic economic idea, then, centered around smaller scale financial examination and the elements of cash. Al-Ghazali, for instance, has emphasized upon money, its functions, and the evolution of its utilization. He additionally clarified the issue of denial of riba and its effect on the economy of a country.

On microeconomic examination, he talked about the issue about weight scales, price controls, the determination of tax in specific conditions or crises. He likewise discussed how did the economy adapt to the effect of rising prices. Should it be possible by means of the market system or government mediation, or other methods. The idea of Al-Ghazali show an unmistakable character, given the philosophical subtleties, thickened because of the impact of mystical science base. Be that as it may, the intriguing piece of the monetary viewpoint is that al-Ghazali was not stuck on the fields of philosophical, yet rather demonstrates an agreeable blend between genuine conditions that has a place with individuals with philosophical qualities and accompanied by a legitimate and clear contentions.

Al-Ghazali centered his focus upon the behavior of individuals as economic agents, the concept of demand and supply, social welfare and modern-day deadweight loss, rising prices and individual profit, market mechanism and evolution, the functions of money, market norms and ethical practices and the function of the state (government) in an economy etc. The underlying idea behind any economic activity within the boundary of Islam, according to him, was that it should be carried out with the sole intention of being rewarded with happiness in the hereafter. He explained why the people should engage in economic activity considering the Quran and Sunnah. Firstly, that Allah (S.W.T) has provided the humans with abundant resources for them to exploit. Secondly, those who are economically more powerful are certainly independent of others as they can pursue religious practices like zakat, hajj, etc. perfectly.

Engaging in legal economic activity, as per him, hence, was a Farz-e-Kifaya. Al-Ghazali stressed the importance of economic rules and principles with regards to an economic transaction and highlighted that each economic actor should have knowledge of the transactions that are prohibited. They must be aware of usury and Islamic transactions of Mudaraba, Musharaka, Ijara, Salam and Istisna. Al-Ghazali stressed importance on the social welfare of the Muslim society and emphasized that an Islamic society’s social welfare is a function of five basic objectives that must be collectively achieved namely life, property, intellect, religion and offspring. Using these objectives, he devised three basic levels of utility for an individual namely needs (zaruriat), pleasure (haajat) and luxuries (tahsinat). Therefore, the concept of the derivation of the demand curve and social welfare had long been formulated by Imam Al-Ghazali.

Today we see that modern-day consumer behavior is reflective of these insights.Iḥya’ is believed to be the most important book of Al Ghazali. The book deals with the intimate relationship between deeds and disposition of the soul, between outer and inner world, regulations and values. Al Ghazali had put an immense amount of effort in writing Iḥya’, also called the source or encyclopedia of knowledge, in which he undertook the task of gaining spiritual existence and illumination. In his monumental work, he has talked about several aspects of the economy for example;The function of MoneyAl-Ghazali states that money is a means to get something. It has no intrinsic value of its own. He personifies money as that mirror which doesn’t have a color of its own but can reflect all kinds of colors. He discussed several issues in relation to money having no intrinsic value.

Firstly, the issue of the prohibition of hoarding money. Ghazali recognized that one of the main functions of money was to circulate in the economy so that acts as a medium of exchange for people who want to derive utility by transacting and that if the money is hoarded and monopolized by certain groups, it would most definitely lead to inflation. This concept is reflective of the Fischer’s Equation or the quantity theory of money. If the money in circulation is less than the need of the people to transact, this would cause a rise in prices. (MV=PT). Secondly, the concept of Usury. He highlighted that using the money as a commodity would violate the purpose of money i.e. to serves as a medium of exchange and a standard of valuing goods, therefore, usury is prohibited.Demand and SupplyAl-Ghazali acknowledges if the fact that for economic trade to take place, division of labor and specialization are the pre-requisites. He recognized that trade adds value to the overall economic activity as traders are driven by their self interest.

Al-Ghazali, in his book, states the evolution of the creation of markets in the following manner, “farmers can only live where agricultural equipment is not available, otherwise blacksmith and carpenter living in which there is no agricultural land. But naturally, they will meet their individual needs. carpenter may also need to eat, but farmers do not need such tools or otherwise. This situation raises a problem. Therefore, it naturally also people will be encouraged to provide storage of tools in one hand and a storage area results in line with the needs of each market forming. Farmers, carpenters and blacksmiths who cannot immediately make exchanges also encouraged to go into this market. When the market was also not found people to barter, he will sell to traders at a relatively cheap price and then stored as inventory. T

raders then sell with a profit rate. This applies to every item.” He mentions the need for secure trade routes and that the state shall provide this sort of protection so that the market grows and expands the economy. Al-Ghazali was also the originator of the theory of demand and supply: “if the farmers do not get a buyer, he would sell it at a cheaper price, and the price can be lowered by increasing the number of goods in the market. Al Ghazali also introduced the elasticity of demand, he identifies the demand for food products is inelastic, because food is a necessity. Because the food trade high profit motive should be minimized, if you want to get high profit from trading, should look for items that are not a necessity.”TaxesAs per Ghazali, if a state’s condition requires guards (military) to protect its borders and if in this circumstance, the state’s treasury is not enough to meet the expenses, then the state reserves the right to collect taxes from the people residing within.

Al-Ghazali also discussed the two sides of the public finances, also known as the ‘budget’ in modern-day. He emphasized that the various sources of income should follow the Islamic rules to determine which revenue is allowed and which is not for e.g. zakat, waqf, shodaqoh of the Muslims and the jizya of the non-Muslims who receive protection form the state are all allowed sources of revenue. He also talked about several ideas relating to financing public facilities, armed forces or other public interests for example the need to tax citizens would be justified if additional financing is required for national defense, or the protection of poor or neglected children. However, what must be taken care of when imposing a tax, according to Ghazali, is the ability of the citizen to bear the tax (tax burden).

On the expenditure side he focused on spending on national security, enforcement of justice and community development. If we examine Al-Ghazali’s ideas closely we can see that they are very similar to the welfare of economic thoughts in the contemporary ideas today.Trade (Bai’)Al-Ghazali analyzed three elements of trade namely the transacting parties (buyer and seller), the item of exchange and the statement of contract. His insightful analysis of these elements proves his worth in the economic thought. At first, he discussed the juristic eligibilities of the person involved in a valid transaction for e.g. transaction with a man or a woman is valid provided that the person is not blind, insane, slave or a minor.

Ethics

Al-Ghazali stressed a high level of importance on carrying out ethical economic activity. He states in his book, “nobody should forget his religion and the next world duringthe course of his trade, commerce and earning livelihood. If he does, he will then be ruinedand will be one of those who sell their next world in lieu of this world; but the wise man is hewho protects his capital. His real capital is his religion and matters related to the nextworld.”Al-Ghazali addressed two broad categories of behaviors in a business.

The first category has an obligatory status whilst the second category has a recommended status.The obligatory category requires upon the Muslims to acquire knowledge of the lawful and the unlawful about the business and to formulate the right intention before starting or getting involved in an economic activity for e.g. the worker should execute his duties with equity and benevolence and to earn what will enable him to perform various commands of Islam. In the recommended category, Al-Ghazali highlights the various actions and behaviors that a trader can adopt towards his buyer to get rewards and ranks, though they are not incumbent upon him to adopt for e.g. limitations on taking higher profits from the buyer by taking advantage of his need or the lack of information, sales on credit in times of need by the buyer and that the lender should grant the optimal time for realization of his dues and he should demand the dues in good manner at that time. The advice given by the Imam serves as a basis for Islamic Bankers of today.

Finally, he discussed on the topic of earnings, trade and commerce by formulating some guidelines which would help one to preserve his religion and his interest in the hereafter. The guidelines are mentioned below as follows:

• Let not the worldly markets distract you from the Hereafter markets, which are the mosques. Allah praises the behavior of some of His servants by saying: "(In the mosques there are) men whom neither trade nor sale diverts from the remembrance of Allah, nor from performing salah (prayer), nor from giving zakat. They fear a Day when hearts and eyes will be overturned (out of the horror of the torment of the Day of resurrection)" (24: 37).
• Always remember Allah (zikr)
• Greed does not have beneficial consequences. Therefore, refrain from it.
• If there is doubt in the heart regarding something, avoid it.
• Adjust the accounts of business with everybody specifically the creditors.

Conclusion

It must be remembered that Al-Ghazali did not dedicate one specific book to the study of economic thought, rather, his findings and views are disseminated throughout his work. It can be concluded from the above details that the thoughts and ideas of Al-Ghazali in the field of economics and economic growth provide direction for development economics in the future.