Uzir Abdul Malik

Alternative Perspectives in Third World Development: The Case of Malaysia

List of Tables - List of Figures - Acknowledgement - Foreword - Introduction M.A.Choudhury, U.A.Malik & M.A.Adnan - Malaysias Economic Performance, An Overview H.Osman-Rani - Macroeconomic Perspectives of the Malaysian Economy Statistical Appendix M.Z.Saleh - Microeconomic Approaches to Socioeconomic Development in the Third World S.Ali & M.A.Adnan - Privatisation as an Instrument for National Policy and Socioeconomic Restructuring U.A.Malik - A Note on the Ethical Role that Money can Play in Development, the Case of Malaysia A-G.Ismail - Trade and Regional Integration in the Global Perspectives for Malaysia M.H.Piei - Political Economy of Development in Malaysia B.N.Ghosh - Perspectives in Economic Growth and Development with an Application to Malaysia M.A.Choudhury - Structural Adjustment within Malaysian Agriculture in Response to Rapid Industrialisation. Technical Appendix: Complementarity and Substitution in Structural Shifts H.M.Alias & M.A.Choudhury - Human Development Through Poverty Alleviation C.Siwar - Instruments of Participatory Enterprise for Grassroots Development M.A.Choudhury - Conclusion M.A.Choudhury, U.A.Malik & M.A.Adnan - Notes and References - Index

Quantitative Analysis and Policy Conclusions

The economic model system developed in Chapter 7 will now be suitably adapted in an actual estimation of the model system for the case of Malaysia for the period 1970–85. Then necessary policy conclusions will be drawn in the Islamic perspective. Finally, we will generalise the policy conclusions to draw up policy directions for evolving the future path of development of a global Islamic political economy.

The Essence of the Islamic Political Economy

This work comprises an intensive study of some of the topics included in earlier works (Choudhury, 1986, 1989a; Choudhury and Malik, 1987, 1988). The main objective here is to delineate in a rigorous way the principle, policy instruments and most important features of the Islamic political economy. The book is developed in a way that will be useful to the advanced economics undergraduate students and to graduate students in the areas of Islamic economics, social economics, the history of economic thought, economic theory and comparative economic systems. The book also addresses the needs of the serious researcher in the area of Islamic economics.

‘Mudarabah’, the Profit-sharing System in Islam

The term ‘mudarabah’ stands for the form of profit-sharing enterprise in the Islamic economic system. It has two principal characteristics. First, the enterprise works on the basis of share capital among a large number of shareholders from various sectors of the economy. Secondly, the profit-sharing enterprise is based on economic cooperation wherein participants undertake joint ventures and cofinance economic projects. The essence of economic cooperation is shown in the sharing of total investments through capital and other visible or invisible assets like allocation of time. All such endowments, no matter how large or how small, on the part of individual shareholders entitle them to equal voting and decision making rights in the enterprise. However, the total profits are shared in proportion to their individual shares in investment.

Conclusion: Towards a Caring Society

The chapters in this book have traversed a wide area of issues and topics underlying socioeconomic development, with special reference to Malaysia in that country’s towards an industrialised economy by the year 2020 — the Vision 2020. These topics and issues have covered both microeconomic and the macroeconomic perspectives. The chapters have tried to present an alternative framework, particularly as the alternative delineates a world-view that is different from and in contrast to the neo-classical, Keynesian, monetarist, Marxist and post-Keynesian paradigms usually found in the study of the socioeconomic universe. The epistemology of ethics, values, well-being, efficiency, stability and growth — in a simultaneous occurrence of these targets — is found to be foreign to the perspective of development in received mainstream doctrines. Consequently, the institutions, policies, programme and visions of socioeconomic development carried out in the received methodological folds are argued to be alienating between the competing ends of economic preferences and distributive preferences. The embedded methodology of neo-classical substitution principle is found not to enable complementarity between these competing ends. This is found to be true both with and without technological change. Hence, in this sense, the design and meaning of technological change, too, remains to be of an alienating nature.

‘Riba’, Financial Interest

‘Riba’ is the generic Quranic terminology for all kinds of excesses above the value of a thing. In the measurement of the excess over the value, no mention of the magnitude of the excess is made. Hence the Quranic law on ‘riba’ includes both usury and interest, irrespective of the magnitude. With respect to the disbanning of interest in all its measures the Quran says, O you who believe! Fear God, and give up What remains of your demand For usury, [in whatever measure] if you are Indeed believers. If you do it not, Take notice of war From God and His Apostle: But if you turn back, You shall have Your capital sums [thus all interest in whatever measure is disallowed]. (S. II, vss. 278–279)

‘Zakat’, the Wealth Tax in Islam

Zakat is one of the five pillars of the Islamic faith and is exercised along with prayer (‘salat’) as a mandatory Islamic devotional practice. This significantly demonstrates the principle of insuperability of ethico-economic matters from the devotional part of Islam. Why is this so? It is so because the structure of the ‘shuratic’ system develops into higher echelons of ethical perfection through progressively better comprehension of the ‘shariah’ and its effective deliberations in the ‘shuratic’ decision making process. This requires interpretation of the procedural content of the shariah’ that can be subjected to ‘ijtehad’ and ‘giyas’. But, more importantly, it requires the inculcation of ‘taqwa’ leading to a firmer grasp of the essence of ‘Tawhid’ that, as we have shown in Chapter 2, takes place functionally in the Islamic ethico-economic order. It is also important to note here that without this devotional approach, the ethical personality of the ‘shura’ cannot be perfected and consequently, the ‘shuratic’ process cannot be effective. This was shown in terms of the limiting values of the polity-market functional relations defined through Banach algebras in Chapter 2.

‘Israf’, Economic Waste

The Quranic meaning of the term ‘israf’ is waste due to wanton consumption and production. A verse in the Quran strictly prohibiting waste goes as follows: But squander not [your wealth] In the manner of a spendthrift. Verily spendtrifts are brothers Of the Evil Ones; And the Evil One Is to his Lord [Himself] Ungrateful. (S. XVII, vss 26, 27)

General Equilibrium Analysis in the Islamic Economy

It was pointed out in Chapter 1 that there is an intrinsic micro-macro interface in the Islamic political economic order. That is to say that macroeconomic relations of output, income, price stabilisation, employment, economic growth and distribution are not independently established at the macroeconomic level in the Islamic economy. They are the result of theoretical and institutional ramifications at the microeconomic level. This is so because of the great role of ‘shura’ in formulating ethical policies, which thereafter influence and interact with the grand ecological order, the market system being a particular subset of that order. The role of free play of the market in pricing and output determination and in acting under ethical requirements of consumption, production and distribution is very important in the Islamic economy; the market system when impacted by the ‘shuratic’ policies is the ultimate test of the ethical transformation. The ‘shura’ can simply research, deliberate and enact newer levels of ethical policies in the drive toward establishing social consensus within the ‘shura’ and between itself and the market system through the ethical transformation of preferences. It cannot legislate the ‘shariah’, the responsibility for which is given to the courts of law and to the social regulatory body of the market place known as ‘al-hisbah’ (Makari, 1983). There is thus no coercion placed by the Islamic polity on the free play of the market system.

Principles and Instruments of the Islamic Political Economy

In this chapter our main objective will be to develop the central principles and instruments of the Islamic political economy in a way that will help establish the ethical general equilibrium and objective criteria of this order. Within that framework, we will show how the nature of goods, choice of technology and the pricing of goods are well determined. The most important explanation of the endogenous nature of ethics and values in this order will thus be demonstrated. In establishing the system of key principles and instruments of the Islamic economic order recourse will be made to the Quran and ‘sunnah’ (Prophetic traditions). A comparative study of the Islamic principles and instruments will also be made.