The Princeton Encyclopedia of Islamic Political Thought is the first reference to Islamic political thought from the birth of Islam to today. Comprehensive, authoritative, and accessible, the Encyclopedia provides much-needed context for understanding contemporary politics in the Islamic world and beyond. In this exclusive excerpt, Timur Kuran of Duke University and author of The Long Divergence: How Islamic Law Held Back the Middle East, explores the intellectual heritage and rise of “Islamic economics,” which entered a new phase during the Middle East’s oil boom of the mid-1970s. “The size of the global Islamic finance sector, estimated at $400 billion as of 2010, has prompted much empirical research aimed at evaluating its performance, as well as theorizing to explain its findings,” writes Kuran.
Throughout its history, Islam has sought to regulate all aspects of life, including economics. Its holy book contains verses concerning such matters as credit, trade, resource allocation, taxation, redistribution, and inheritance. The Qur’an prohibits ribă, a pre- Islamic credit practice, which commonly led borrowers into enslavement (2:274— 80, 3:130, 4:160— 61). It prescribes an annual tax called zakat on certain forms of wealth and income in order to finance eight categories of public expenditure, including defense, the propagation of Islam, and poor relief (2:177, 2:215, 4:8, 9:60, 24:22). It entitles all surviving children of a deceased person to a share of his or her estate (4:11— 12, 176). It requires individuals to be honest and fair in commercial transactions (55:7— 9).
Over the ages, a wide variety of economic policies have been justified through these prescriptions and prohibitions, including ones that are mutually incompatible. Often the justifications in question have rested also on the sunna, the normative practice of the Prophet Muhammad. From the dawn of Islam to the present, the use of interest on loans has been treated as illegitimate through an expansive interpretation of the ban on ribā, understood as usury. The preindustrial guilds that regulated the activities of craftsmen were given monopolistic and monopolistic privileges out of a sense of fairness defined in Islamic terms. In certain times and places, agricultural taxes were collected according to rules prescribed by the Qur’an.
View the rest of the Princeton Encyclopedia of Islamic Political Thought excerpt here: Economic Theory