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Social Welfare System

Domains of Economics And Religion

Religion in general deals with human beings essentially from the point of view of their relationship with the creator and the consequences of this relationship as far as the human beings' role and position in the world are concerned. It is obvious that the beliefs one holds about one's relation with the creator, position among other beings and the role one believes one should play concerning one's surroundings, influence the shape of human behaviour toward other people and things in the world.

 
Therefore, to understand the relation between religion and economics in an intelligible way, one must look into their respective definitions and scopes so that one may obtain a clear idea about any overlap or interrelation that might exist between them.

 
Theologians and sociologists offer many definitions of religion of which one may quote only a few.  In his book titled Al Din, [The Religion], M.A. Draz quotes several definitions of religion. 

• Reveille, for example, defines religion as "the shaping of human life according to a bond between the human soul and a mysterious Soul, whose domination over the human soul and the world man recognizes and to Whom he likes to feel attached."
• Michael Mayer defines it as "the set of beliefs and precepts that must guide us in our conduct toward God, other people and toward ourselves."
• The New Webster's Dictionary gives the following definition: "recognition by man of a controlling Superhuman Power entitled to obedience, reverence and worship."

All these definitions suggest that religion affects human behaviour.

The Arabic word for religion, al din itself points to the meaning of a path and a way of life for which man is accountable and held responsible. Draz sums up all the definitions of religion as "a chart of conduct in life." From all this, we may conclude that religion draws a chart of behaviour for human beings in all aspects of life, material and otherwise.

 
On the other hand, economists define economics in several ways. R. Robbins' definition may be among those most accepted by Western economists: "the science that studies human behaviour as a relationship between ends and scarce means that have alternative uses." J. Harvy uses simpler words in defining economics as "the study of how people allocate their limited resources to provide for their wants." However, P. Samuelson adds more details. He defines economics as "the study of human behaviour in relation to using scarce productive resources to produce goods and services and distribute them for consumption." All these definitions show that economics looks into that part of human behaviour that deals with material matters related to resources, goods and services.

 
A quick comparison of the definitions of religion and economics allows us to notice that there is a big area of overlapping between them. One can easily deduct that economics falls entirely within the domain of religion since economics deals with a subset of human behaviour included in the larger set of all human actions that is covered by the norms set by religion.

Usury - lending at interest or excessive interest - has, according to known records, been practiced in various parts of the world for at least four thousand years. During this time, there is substantial evidence of intense criticism by various traditions, institutions and social reformers on moral, ethical, religious and legal grounds.The rationale employed by these wide-ranging critics have included arguments about work ethic, social justice, economic instability, ecological destruction and inter-generational equity. While the contemporary relevance of these largely historical debates are not analysed in detail, the authors contend that their significance is greater than ever before in the context of the modern interest-based global economy.

The Islamic economic system evolves from Islamic law and law becomes the centrepiece of the direction of Islamic economics.  While major work on Islamic legal system was done in the two centuries following the Prophet’s death, Islamic economic system is a fairly modern development. It has mainly developed as a reaction to the neo-classical economic systems of Western imperialism and colonialism and is an attempt of Muslim societies to find an original path of development.  Islamic economics rests on four pillars:

• Zakat is a capital wealth tax levied upon the rich for income redistribution to the poor. It is mandatory for every Muslim and is collected annually as a part of working capital as well as on property and savings. The rate at which zakat is levied varies: from 2.5% on cash assets to 10% on produce from irrigated land. On mining it is applicable at 20% ad-valorem and the same applies to modern oil exploitation.

• Together with Riba (prohibition of usury), the second cornerstone of Islamic economics, Islam stresses the need for a redistributive mechanism in society. The purpose of both the instruments is to curb the power of the rentier class by undercutting income from hoarded capital. The aim of forbidding usury is to prevent wealth accumulation through lending money at a cost to borrowers.

• In order to encourage sharing of risk and profit, the institution of mudarabaha is provided for in the Islamic economics system. It allows for capital participation in economic ventures with risk and profit sharing and is the Islamic substitute for to the use of interest . The sharing of risk and profit is especially encouraged between labour and investor. The institution of mudarabaha recognises the equal rights of workers and investors.

• The prohibition of waste and idleness is the fourth pillar of Islamic economics. Israf  prohibits wasteful consumption, wasteful production and idleness of productive resources. The social cost of luxurious consumption and production is that fewer resources are allocated to the production of goods of common good with a higher marginal utility. Productive resources should be used for common good rather than fulfilling the luxurious wants of a few.

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