Mehmet Asutay

A Political Economy Approach to Islamic Economics: Systemic Understanding for an Alternative Economic System

This paper, thus, is an attempt to discuss the systemic nature of Islamic economics, in which it argues that the modern variant of Islamic economics is a development that began in the 1970s with an alternative system understanding to the existing capitalist modes of production. In this new discourse, Islamic economics held that the capitalist economic order was responsible for the failure of economic development and environmental issues in developing countries. Therefore, it claimed to be an alternative economic system, that, also, owed its development to the emergence of identity politics in the 1970s.With the rapid development of Islamic finance, research focusing on the foundational base, namely Islamic economics, has been largely ignored. However, without establishing the foundational norms, which is the ethical system of this new paradigm, it is not possible to have a robust financial system, as in Islamic finance. This paper, therefore, explores the original wisdom in revealing the systemic and alternative system discourse of Islamic economics regardless whether such a system is a possible or not.

Islamic Banking and Finance: Social Failure

The phenomenal growth of the Islamic banking and finance (IBF) industry has been remarkable since it came into existence just over thirty years ago. However, a closer reading of this positive development indicates that IBF industry does not necessarily shares the aspirations or the foundational claims of Islamic moral economy (IME), an authentic value system for human-centred economic development and social justice. Despite its contribution in expanding the financial base in the Muslim countries and overcoming financial exclusion through product diversification, IBF, in responding to the realities of the international financial system has converged towards conventional notion of managing wealth, resulting in tensions with the foundational axioms upon which an Islamo-ethical financial system was intended to be built. In such transformation, the identity of IBF is reduced to the mere removal of riba and conducting financial activity in contractual norms derived from the Shari’ah. The result, therefore, has been the divergence between the aspirations of IME, and IBF as an instrument of that system.

Islamic Banking and Finance and its Role in the GCC and the EU Relationship: Principles, Developments and the Bridge Role of Islamic Finance

IBF is a novel financing method with a particular value and operational proposition which has existed in its modern form in the GCC region since the mid-1970s. Since the 1990s, it has become an important partner in the global financial system, and currently, IBF has proved that it is a sustainable reality, evidenced by its resilience and growth even during a period of financial crisis. Thus, it provides alternative opportunities for all countries regardless of its religious nature, as in its modern version it represents ‘commercial banking’ with a specific legal method, namely Shari’ah compliance. IBF’s contribution to the EU economies is unquestionable, as Davies argues above, and further developments in IBF in the EU are expected in the coming years. The lack of a common financial system in the EU will complicate the task of expansion of IBF, but the experiences and social capital of the countries that have already adopted the system will help other countries to locate ways in which they can make amendments to their legal and regulative environment. For example, the French financial authorities benefited from the British experience and the Italian financial environment followed the French and the British example. This paper suggests that in addition to its contribution to the economies of the EU countries, IBF can play an important role in reconciling the political differences between the GCC and the EU countries, and hence can act as a bridge to civilizational dialogue. In the past, it was trade that managed to bring the worlds together for a peaceful coexistence; IBF can play that role in contemporary times. The same spirit and wisdom of the past centuries can shed light on the new encounters between the two worlds through financing activities. The hope is to move away from ‘dependence’ on the European norms in financing to ‘interdependence’ in which parties are equal in terms of institutions, operations, as well as knowledge. In this context, the attitudes of the EU countries will play a key role in determining the success or failure of the new system. While many countries such as the UK, Switzerland, France and Luxembourg, have shown positive and facilitating trends so far, only time will tell where such a dialogue will lead.

Does ethico‐moral coalition complement to economic coalition?: A response in the periphery of Islamic economics

Purpose - To reason whether the ethical–moral cum economic coalition among the different sets of economy is more efficient with objectives of Islamic Shariah. Design/methodology/approach - This is a theoretical paper based on the modified model of layers of economic coalition which was initially developed by W. Leontief and P.N. Mathur and tries to evaluate the impact of ethical–moral cum economic coalition among different sets of an economy within the framework of Islamic political economy system. Findings - This study suggests that endogenoising the ethical–moral cum economic coalitions will comparatively enhance the efficiency level of the economy, and will also increase the social welfare level. Practical implications - A dynamic cum marginal input–output table can be constructed on the basis of this framework. Originality/value - This research is beneficial to the researchers, policy makers and social scientists for the enhancement of the level of social welfare through this coalition.

Price behaviour, vintage capital and Islamic economy

Purpose - To find out the behaviour of firms with objectives of Islamic Design/methodology/approach - This is a theoretical paper based on the modified model of layers of techniques which was initially developed by Professors W. Leontief and P. N. Mathur and tries to evaluate the impact of entrance of new techniques on obsolescence in the ethical-moral cum economic framework of Islamic political economy system. Findings - This study suggests wastage of the resources because of their economic obsolescence and on the cost of future generation is not allowed in the system of Islam and ultimately decrease the social welfare level. Research limitations/implications - A dynamic cum marginal input-output table can be constructed on the basis of this framework and formulate the socio-economic policy. Originality/value - This research is beneficial to the researchers, policy makers and social scientists for the enhancement of the level of social welfare through this model.

Takaful investment portfolios : a study of the composition of takaful funds in the GCC and Malaysia

The Islamic finance industry has witnessed remarkable growth over the last decade, and one of the most successful segments —poised for even greater expansion—is the Islamic insurance (takaful) industry. In Takaful Investment Portfolios, distinguished takaful scholar Abdulrahman Khalil Tolefat explores the investment portfolios of takaful companies in both the GCC countries and Malaysia, the tip of Islamic finance industry. Investigating the trends and patterns of investment of takaful companies, the book looks at shareholders as well as general and family funds to determine where these companies are investing today, and where they are likely to invest in the future.

Deconstructing the Functioning of Political Manipulation of the Economy in Turkey

As evident in the related literature, the political manipulation of the economy is a prevalent norm; however its functioning may differ in each economy. This paper, thus, aims at taking the analysis a step further by investigating the nature, distinguishing characteristics, and mechanisms through which political manipulation of the economy are exercised in Turkey, thereby it identifies the country specific differences in the way political business cycles are exercised. The analysis renders support for the micro-level policies for political manipulation of the economy, rather than systematic manipulation of fiscal and monetary policies as suggested by political business cycles modelling. However, such policies still have macroeconomic consequences, which create disequilibrium in the economy.

The economic and political determinants of depth and strength in sukuk markets.

Previous research has drawn five main conclusion about the sukuk market: developments in economic and financial instruments, coupled with technological innovations, as well as political, regulatory improvements and increased levels of stability have created a constant and increasing flow of capital to emerging markets; emerging debt markets are the highest beneficiaries of this phenomenon; this inflow shows significant variations in their destinations depending on several factors; Islamic finance has emerged as a new and integrated branch of financial markets during the same time, but, in parallel to the developments in conventional emerging markets, this also shows strong variations across countries, especially with regards to debt in terms of sukuk markets; and, finally, Islamic financial markets are reaching a certain stage of maturity after a long period of strong growth, in part owing to favourable global conditions and the innovations mentioned above. However, given that the economic sizes and market capitalizations of the conventional base for Islamic finance is relatively small, at this stage of maturity, Islamic finance will eventually need to reach out to market participants which do not have the emotional attachment of the conventional base. This study explores this particular issue and examines the potential reasons for variation between the development and market depth of sukuk markets. In addition, this chapter explores alternative channels that can be established to attract unconventional market participants.

İslam Ekonomisinin Arzuları ve Gerçekleri Arasındaki Uzaklaşma : Farklılığı Azaltmaya Yönelik Bir Politik Ekonomi Yaklaşımı (Çeviri)

Islam ekonomisi modern anlamda 1960’larda ortaya cikmasina ragmen, simdilerde ana akim neoklasik gelismeye karsi Islami bir alternatif olarak temsil edilen tek tezahurun Islami banka ve finans endustrisi (IBF) oldugunu goruyoruz. IBF endustrisindeki gelismeler gosteriyor ki bu endustri geleneksel finansa dogru yaklasmistir. Sonucta, bu endustri Islami ekonomik sistemin kurumsal ve politik arzularini yerine getirmekte basarisiz olmustur. Bu makale Islami ekonomik sistemin arzulari ile IBF endustrisi arasindaki farklilasmanin nasil meydana geldigini aciklamaya calismaktadir ve salt ekonomi ve fikih dusuncesinin otesinde olan Islam’in kavramsal bir gelisme modelini sunmaktadir. Bu makale temel aksiyomlarin aslinda tamamen temel kurumsal uygulamalara dayandigini gostermek icin politik ekonomi yaklasimini onermektedir. Ayrica bu amaci gerceklestirmek icin politik vizyon, istek ve liderligi de iceren on kosullari aciklamaktadir.