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Islamic economics Islamic economics ( ar, الاقتصاد الإسلامي) refers to the knowledge of economics or economic activities and processes in terms of Islamic principles and teachings. Islam has a set of special moral norms and values about individua ...
and
Muslim world The terms Muslim world and Islamic world commonly refer to the Islamic community, which is also known as the Ummah. This consists of all those who adhere to the religious beliefs and laws of Islam or to societies in which Islam is practiced. I ...
.'' Between the 9th and 14th centuries, the Muslim world developed many advanced economic concepts, techniques and usages. These ranged from areas of production, investment, finance, economic development, taxation, property use such as
Hawala Hawala or hewala ( ar, حِوالة , meaning ''transfer'' or sometimes ''trust''), also known as in Persian, and or in Somali, is a popular and informal value transfer system based on the performance and honour of a huge network of money ...
: an early informal value transfer system, Islamic trusts, known as
waqf A waqf ( ar, وَقْف; ), also known as hubous () or '' mortmain'' property is an inalienable charitable endowment under Islamic law. It typically involves donating a building, plot of land or other assets for Muslim religious or charitabl ...
, systems of
contract A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tr ...
relied upon by merchants, a widely circulated common currency,
cheque A cheque, or check (American English; see spelling differences) is a document that orders a bank (or credit union) to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued. The per ...
s, promissory notes, early contracts, bills of exchange, and forms of commercial partnership such as mufawada. Specific Islamic concepts involving money, property, taxation, charity and the
Five Pillars Five Pillars or five pillars may refer to: * Five Pillars of Islam, often regarded as basic religious acts of Muslim life * Five pillars puzzle, a mechanical puzzle also known as ''Baguenaudier'' and ''five pillars problem'' *''Five Pillars'' of ...
include: *''
zakat Zakat ( ar, زكاة; , "that which purifies", also Zakat al-mal , "zakat on wealth", or Zakah) is a form of almsgiving, often collected by the Muslim Ummah. It is considered in Islam as a religious obligation, and by Quranic ranking, is n ...
'' (the "taxing of certain goods, such as harvest, to allocate these taxes to expand that, are also explicitly defined, such as aid to the needy"); *''
Gharar ''Gharar'' ( ar, غرر) literally means uncertainty, hazard, chance or risk. It is a negative element in ''mu'amalat'' ''fiqh'' (transactional Islamic jurisprudence), like ''riba'' (usury) and '' maysir'' (gambling). One Islamic dictionary (''A ...
'' ("the interdiction of chance ... that is, of the presence of any element of uncertainty, in a contract (which excludes not only insurance but also the lending of money without participation in the risks); and *''
riba The Royal Institute of British Architects (RIBA) is a professional body for architects primarily in the United Kingdom, but also internationally, founded for the advancement of architecture under its royal charter granted in 1837, three suppl ...
'' ("every kind of excess or unjustified disparity between the exchanged objects or counter values"). These concepts, like others in
Islamic law Sharia (; ar, شريعة, sharīʿa ) is a body of religious law that forms a part of the Islamic tradition. It is derived from the religious precepts of Islam and is based on the sacred scriptures of Islam, particularly the Quran and the ...
and
jurisprudence Jurisprudence, or legal theory, is the theoretical study of the propriety of law. Scholars of jurisprudence seek to explain the nature of law in its most general form and they also seek to achieve a deeper understanding of legal reasoning ...
, came from the "prescriptions, anecdotes, examples, and words of the Prophet, all gathered together and systematized by commentators according to an inductive, casuistic method." Sometimes other sources such as al-urf, (the custom), al-
'aql ‘Aql ( ar, عقل, meaning "intellect"), is an Arabic language term used in Islamic philosophy or theology for the intellect or the rational faculty of the soul or mind. It is the normal translation of the Greek term ''nous''. In jurisprudenc ...
(
reason Reason is the capacity of consciously applying logic by drawing conclusions from new or existing information, with the aim of seeking the truth. It is closely associated with such characteristically human activities as philosophy, science, lang ...
) or al-
ijma ''Ijmāʿ'' ( ar, إجماع , " consensus") is an Arabic term referring to the consensus or agreement of the Islamic community on a point of Islamic law. Sunni Muslims regard ''ijmā as one of the secondary sources of Sharia law, after the Qu ...
(consensus of the jurists) were employed. In addition, Islamic law has developed areas of law that correspond to secular laws of
contracts A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tran ...
and
torts A tort is a civil wrong that causes a claimant to suffer loss or harm, resulting in legal liability for the person who commits the tortious act. Tort law can be contrasted with criminal law, which deals with criminal wrongs that are punishable ...
. Contemporary Islamic scholars draw heavily on classical opinions. Modern Islamic economics emerged in the 1945s, and as of 2004 Islamic Banks have been established in over 8 countries, and
interest In finance and economics, interest is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is disti ...
has been banned in three:
Pakistan Pakistan ( ur, ), officially the Islamic Republic of Pakistan ( ur, , label=none), is a country in South Asia. It is the world's fifth-most populous country, with a population of almost 243 million people, and has the world's second-la ...
,
Iran Iran, officially the Islamic Republic of Iran, and also called Persia, is a country located in Western Asia. It is bordered by Iraq and Turkey to the west, by Azerbaijan and Armenia to the northwest, by the Caspian Sea and Tu ...
and the
Sudan Sudan ( or ; ar, السودان, as-Sūdān, officially the Republic of the Sudan ( ar, جمهورية السودان, link=no, Jumhūriyyat as-Sūdān), is a country in Northeast Africa. It shares borders with the Central African Republic ...
.


Legal institutions


Hawala agency

The ''
Hawala Hawala or hewala ( ar, حِوالة , meaning ''transfer'' or sometimes ''trust''), also known as in Persian, and or in Somali, is a popular and informal value transfer system based on the performance and honour of a huge network of money ...
'', an early
informal value transfer system An informal value transfer system (IVTS) is any system, mechanism, or network of people that receives money for the purpose of making the funds or an equivalent value payable to a third party in another geographic location, whether or not in the s ...
, has its origins in classical
Islamic law Sharia (; ar, شريعة, sharīʿa ) is a body of religious law that forms a part of the Islamic tradition. It is derived from the religious precepts of Islam and is based on the sacred scriptures of Islam, particularly the Quran and the ...
, and is mentioned in texts of
Islamic jurisprudence ''Fiqh'' (; ar, فقه ) is Islamic jurisprudence. Muhammad-> Companions-> Followers-> Fiqh. The commands and prohibitions chosen by God were revealed through the agency of the Prophet in both the Quran and the Sunnah (words, deeds, and e ...
as early as the 8th century. ''Hawala'' itself later influenced the development of the agency in
common law In law, common law (also known as judicial precedent, judge-made law, or case law) is the body of law created by judges and similar quasi-judicial tribunals by virtue of being stated in written opinions."The common law is not a brooding omniprese ...
and in civil laws such as the ''aval'' in
French law The Law of France refers to the legal system in the French Republic, which is a civil law legal system primarily based on legal codes and statutes, with case law also playing an important role. The most influential of the French legal codes is t ...
and the ''Cavallo'' in Italian law. The words ''aval'' and ''Cavallo'' were themselves derived from ''Hawala''. The transfer of
debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The d ...
, which was "not permissible under
Roman law Roman law is the legal system of ancient Rome, including the legal developments spanning over a thousand years of jurisprudence, from the Twelve Tables (c. 449 BC), to the '' Corpus Juris Civilis'' (AD 529) ordered by Eastern Roman emperor ...
but became widely practiced in medieval Europe, especially in
commercial transaction A financial transaction is an agreement, or communication, between a buyer and seller to exchange goods, services, or assets for payment. Any transaction involves a change in the status of the finances of two or more businesses or individuals. A ...
s", was due to the large extent of the "trade conducted by the Italian cities with the
Muslim world The terms Muslim world and Islamic world commonly refer to the Islamic community, which is also known as the Ummah. This consists of all those who adhere to the religious beliefs and laws of Islam or to societies in which Islam is practiced. I ...
in the Middle Ages." The agency was also "an
institution Institutions are humanly devised structures of rules and norms that shape and constrain individual behavior. All definitions of institutions generally entail that there is a level of persistence and continuity. Laws, rules, social conventions a ...
unknown to Roman law" as no "individual could conclude a binding contract on behalf of another as his
agent Agent may refer to: Espionage, investigation, and law *, spies or intelligence officers * Law of agency, laws involving a person authorized to act on behalf of another ** Agent of record, a person with a contractual agreement with an insuranc ...
." In Roman law, the "contractor himself was considered the party to the contract and it took a second contract between the person who acted on behalf of a principal and the latter to transfer the rights and the obligations deriving from the contract to him." On the other hand, Islamic law and the later common law "had no difficulty in accepting agency as one of its institutions in the field of contracts and obligations in general."


Waqf trust

The ''
waqf A waqf ( ar, وَقْف; ), also known as hubous () or '' mortmain'' property is an inalienable charitable endowment under Islamic law. It typically involves donating a building, plot of land or other assets for Muslim religious or charitabl ...
'' in
Islamic law Sharia (; ar, شريعة, sharīʿa ) is a body of religious law that forms a part of the Islamic tradition. It is derived from the religious precepts of Islam and is based on the sacred scriptures of Islam, particularly the Quran and the ...
, which developed in the medieval Islamic world from the 7th to 9th centuries, bears a notable resemblance to the English
trust law A trust is a legal relationship in which the holder of a right gives it to another person or entity who must keep and use it solely for another's benefit. In the Anglo-American common law, the party who entrusts the right is known as the " sett ...
. Every ''waqf'' was required to have a ''waqif'' (founder), ''mutawillis'' (trustee), ''
qadi A qāḍī ( ar, قاضي, Qāḍī; otherwise transliterated as qazi, cadi, kadi, or kazi) is the magistrate or judge of a '' sharīʿa'' court, who also exercises extrajudicial functions such as mediation, guardianship over orphans and mino ...
'' (judge) and beneficiaries. Under both a ''waqf'' and a trust, "property is reserved, and its
usufruct Usufruct () is a limited real right (or ''in rem'' right) found in civil-law and mixed jurisdictions that unites the two property interests of ''usus'' and ''fructus'': * ''Usus'' (''use'') is the right to use or enjoy a thing possessed, directl ...
appropriated, for the benefit of specific individuals, or for a general
charitable The practice of charity is the voluntary giving of help to those in need, as a humanitarian act, unmotivated by self-interest. There are a number of philosophies about charity, often associated with religion. Etymology The word ''charity'' or ...
purpose; the corpus becomes
inalienable ''InAlienable'' is a 2007 science fiction film with horror and comic elements, written and executive produced by Walter Koenig, and directed by Robert Dyke. It was the first collaboration of Koenig and Dyke since their 1989 production of '' Moo ...
; estates for life in favor of successive beneficiaries can be created" and "without regard to the law of
inheritance Inheritance is the practice of receiving private property, titles, debts, entitlements, privileges, rights, and obligations upon the death of an individual. The rules of inheritance differ among societies and have changed over time. Officiall ...
or the rights of the heirs; and continuity is secured by the successive appointment of trustees or ''mutawillis''." The only significant distinction between the Islamic ''waqf'' and English trust was "the express or implied reversion of the ''waqf'' to charitable purposes when its specific object has ceased to exist", though this difference only applied to the ''waqf ahli'' (Islamic family trust) rather than the ''waqf khairi'' (devoted to a charitable purpose from its inception). Another difference was the English vesting of "legal estate" over the trust property in the trustee, though the "trustee was still bound to administer that property for the benefit of the beneficiaries." In this sense, the "role of the English trustee, therefore, does not differ significantly from that of the '' mutually''." The trust law developed in England at the time of the
Crusades The Crusades were a series of religious wars initiated, supported, and sometimes directed by the Latin Church in the medieval period. The best known of these Crusades are those to the Holy Land in the period between 1095 and 1291 that were ...
, during the 12th and 13th centuries was introduced by Crusaders who may have been influenced by the ''waqf'' institutions they came across in the Middle East. After the Islamic waqf law and
madrassah Madrasa (, also , ; Arabic: مدرسة , pl. , ) is the Arabic word for any type of educational institution, secular or religious (of any religion), whether for elementary instruction or higher learning. The word is variously transliterated '' ...
foundations were firmly established by the 10th century, the number of
Bimaristan A bimaristan (; ), also known as ''dar al-shifa'' (also ''darüşşifa'' in Turkish) or simply maristan, is a hospital in the historic Islamic world. Etymology ''Bimaristan'' is a Persian word ( ''bīmārestān'') meaning "hospital", with ' ...
hospitals multiplied throughout Islamic lands. In the 11th century, every Islamic city had at least several hospitals. The waqf trust institutions funded the hospitals for various expenses, including the
wage A wage is payment made by an employer to an Worker, employee for work (human activity), work done in a specific period of time. Some examples of wage payments include wiktionary:compensatory, compensatory payments such as ''minimum wage'', ''p ...
s of doctors,
ophthalmologists Ophthalmology ( ) is a surgical subspecialty within medicine that deals with the diagnosis and treatment of eye disorders. An ophthalmologist is a physician who undergoes subspecialty training in medical and surgical eye care. Following a medic ...
, surgeons,
chemist A chemist (from Greek ''chēm(ía)'' alchemy; replacing ''chymist'' from Medieval Latin ''alchemist'') is a scientist trained in the study of chemistry. Chemists study the composition of matter and its properties. Chemists carefully describe t ...
s,
pharmacist A pharmacist, also known as a chemist ( Commonwealth English) or a druggist (North American and, archaically, Commonwealth English), is a healthcare professional who prepares, controls and distributes medicines and provides advice and instruc ...
s, domestics and all other staff, the purchase of foods and
drugs A drug is any chemical substance that causes a change in an organism's physiology or psychology when consumed. Drugs are typically distinguished from food and substances that provide nutritional support. Consumption of drugs can be via inhalati ...
; hospital equipment such as beds, mattresses, bowls and perfumes; and repairs to buildings. The waqf trusts also funded medical schools, and their revenues covered various expenses such as their maintenance and the payment of teachers and students.


Classical Muslim commerce

The systems of
contract A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tr ...
relied upon by merchants was very effective. Merchants would buy and sell on commission, with money
loan In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that de ...
ed to them by wealthy investors, or a joint investment of several merchants, who were often Muslim, Christian and Jewish. Recently, a collection of documents was found in an
Egypt Egypt ( ar, مصر , ), officially the Arab Republic of Egypt, is a transcontinental country spanning the northeast corner of Africa and southwest corner of Asia via a land bridge formed by the Sinai Peninsula. It is bordered by the Medite ...
ian
synagogue A synagogue, ', 'house of assembly', or ', "house of prayer"; Yiddish: ''shul'', Ladino: or ' (from synagogue); or ', "community". sometimes referred to as shul, and interchangeably used with the word temple, is a Jewish house of wors ...
shedding a very detailed and human light on the life of medieval Middle Eastern merchants. Business
partnership A partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, government ...
s would be made for many commercial ventures, and bonds of
kinship In anthropology, kinship is the web of social relationships that form an important part of the lives of all humans in all societies, although its exact meanings even within this discipline are often debated. Anthropologist Robin Fox says tha ...
enabled trade
network Network, networking and networked may refer to: Science and technology * Network theory, the study of graphs as a representation of relations between discrete objects * Network science, an academic field that studies complex networks Mathematics ...
s to form over huge distances. During the ninth century banks enabled the drawing of check-in by a bank in
Baghdad Baghdad (; ar, بَغْدَاد , ) is the capital of Iraq and the second-largest city in the Arab world after Cairo. It is located on the Tigris near the ruins of the ancient city of Babylon and the Sassanid Persian capital of Ctesip ...
that could be cashed in
Morocco Morocco (),, ) officially the Kingdom of Morocco, is the westernmost country in the Maghreb region of North Africa. It overlooks the Mediterranean Sea to the north and the Atlantic Ocean to the west, and has land borders with Algeria to ...
. The concepts of
welfare Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specifical ...
and
pension A pension (, from Latin ''pensiō'', "payment") is a fund into which a sum of money is added during an employee's employment years and from which payments are drawn to support the person's retirement from work in the form of periodic payments ...
were introduced in early
Islamic law Sharia (; ar, شريعة, sharīʿa ) is a body of religious law that forms a part of the Islamic tradition. It is derived from the religious precepts of Islam and is based on the sacred scriptures of Islam, particularly the Quran and the ...
as forms of ''
Zakat Zakat ( ar, زكاة; , "that which purifies", also Zakat al-mal , "zakat on wealth", or Zakah) is a form of almsgiving, often collected by the Muslim Ummah. It is considered in Islam as a religious obligation, and by Quranic ranking, is n ...
'' (charity), one of the
Five Pillars of Islam The Five Pillars of Islam (' ; also ' "pillars of the religion") are fundamental practices in Islam, considered to be obligatory acts of worship for all Muslims. They are summarized in the famous hadith of Gabriel. The Sunni and Shia agree on ...
, since the time of the
Abbasid The Abbasid Caliphate ( or ; ar, الْخِلَافَةُ الْعَبَّاسِيَّة, ') was the third caliphate to succeed the Islamic prophet Muhammad. It was founded by a dynasty descended from Muhammad's uncle, Abbas ibn Abdul-Muttalib ...
caliph A caliphate or khilāfah ( ar, خِلَافَة, ) is an institution or public office under the leadership of an Islamic steward with the title of caliph (; ar, خَلِيفَة , ), a person considered a political-religious successor to th ...
Al-Mansur Abū Jaʿfar ʿAbd Allāh ibn Muḥammad al-Manṣūr (; ar, أبو جعفر عبد الله بن محمد المنصور‎; 95 AH – 158 AH/714 CE – 6 October 775 CE) usually known simply as by his laqab Al-Manṣūr (المنصور) ...
in the 8th century. The taxes (including ''Zakat'' and ''
Jizya Jizya ( ar, جِزْيَة / ) is a per capita yearly taxation historically levied in the form of financial charge on dhimmis, that is, permanent non-Muslim subjects of a state governed by Islamic law. The jizya tax has been understood in Isl ...
'') collected in the
treasury A treasury is either *A government department related to finance and taxation, a finance ministry. *A place or location where treasure, such as currency or precious items are kept. These can be state or royal property, church treasure or ...
of an Islamic
government A government is the system or group of people governing an organized community, generally a state. In the case of its broad associative definition, government normally consists of legislature, executive, and judiciary. Government i ...
was used to provide income for the needy, including the poor, elderly, orphans, widows, and the disabled. According to the Islamic jurist
Al-Ghazali Al-Ghazali ( – 19 December 1111; ), full name (), and known in Persian-speaking countries as Imam Muhammad-i Ghazali (Persian: امام محمد غزالی) or in Medieval Europe by the Latinized as Algazelus or Algazel, was a Persian polym ...
(Algazel, 1058–1111), the government was also expected to store up food supplies in every region in case of a disaster or famine occurs. The
Caliphate A caliphate or khilāfah ( ar, خِلَافَة, ) is an institution or public office under the leadership of an Islamic steward with the title of caliph (; ar, خَلِيفَة , ), a person considered a political-religious successor to th ...
was thus one of the earliest
welfare state A welfare state is a form of government in which the state (or a well-established network of social institutions) protects and promotes the economic and social well-being of its citizens, based upon the principles of equal opportunity, equitabl ...
s, particularly the
Abbasid Caliphate The Abbasid Caliphate ( or ; ar, الْخِلَافَةُ الْعَبَّاسِيَّة, ') was the third caliphate to succeed the Islamic prophet Muhammad. It was founded by a dynasty descended from Muhammad's uncle, Abbas ibn Abdul-Mutta ...
.


Economy in the Caliphate and Islamic empires

In the medieval Arab Agricultural Revolution, a social transformation took place as a result of changing land
ownership Ownership is the state or fact of legal possession and control over property, which may be any asset, tangible or intangible. Ownership can involve multiple rights, collectively referred to as title, which may be separated and held by different ...
giving individuals of any
gender Gender is the range of characteristics pertaining to femininity and masculinity and differentiating between them. Depending on the context, this may include sex-based social structures (i.e. gender roles) and gender identity. Most cultures ...
, the right to buy, sell,
mortgage A mortgage loan or simply mortgage (), in civil law jurisdicions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any p ...
and inherit land. Early forms of proto-
capitalism Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, price system, private pr ...
and
free market In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any ...
s were present in the
Caliphate A caliphate or khilāfah ( ar, خِلَافَة, ) is an institution or public office under the leadership of an Islamic steward with the title of caliph (; ar, خَلِيفَة , ), a person considered a political-religious successor to th ...
.''The Cambridge economic history of Europe'', p. 437.
Cambridge University Press Cambridge University Press is the university press of the University of Cambridge. Granted letters patent by King Henry VIII in 1534, it is the oldest university press in the world. It is also the King's Printer. Cambridge University Pres ...
, .
An early
market economy A market economy is an economic system in which the decisions regarding investment, production and distribution to the consumers are guided by the price signals created by the forces of supply and demand, where all suppliers and consumers a ...
and early form of
merchant capitalism Some economic historians use the term merchant capitalism to refer to the earliest phase in the development of capitalism as an economic and social system. However, others argue that mercantilism, which has flourished widely in the world without ...
developed between the 8th and 12th centuries. A vigorous monetary economy developed based on the wide circulation of a common currency (the
dinar The dinar () is the principal currency unit in several countries near the Mediterranean Sea, and its historical use is even more widespread. The modern dinar's historical antecedents are the gold dinar and the silver dirham, the main coin of ...
) and the integration of previously independent monetary areas. Business techniques and forms of business organization employed during this time included early contracts,
bills of exchange A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time, whose payer is usually named on the document. More specifically, it is a document contemplated by or consisting of a ...
, long-distance
international trade International trade is the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services. (see: World economy) In most countries, such trade represents a significa ...
, early forms of
partnership A partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, government ...
(''mufawada'') such as
limited partnership A limited partnership (LP) is a form of partnership similar to a general partnership except that while a general partnership must have at least two general partners (GPs), a limited partnership must have at least one GP and at least one limited p ...
s (''mudaraba''), and early forms of credit, debt, profit, loss,
capital Capital may refer to: Common uses * Capital city, a municipality of primary status ** List of national capital cities * Capital letter, an upper-case letter Economics and social sciences * Capital (economics), the durable produced goods used fo ...
(''al-mal''),
capital accumulation Capital accumulation is the dynamic that motivates the pursuit of profit, involving the investment of money or any financial asset with the goal of increasing the initial monetary value of said asset as a financial return whether in the fo ...
(''nama al-mal''),
circulating capital Circulating capital includes intermediate goods and operating expenses, i.e., short-lived items that are used in production and used up in the process of creating other goods or services.Mark Blaug, 2008. "circulating capital," ''The New Palgrave ...
,
capital expenditure Capital expenditure or capital expense (capex or CAPEX) is the money an organization or corporate entity spends to buy, maintain, or improve its fixed assets, such as buildings, vehicles, equipment, or land. It is considered a capital expenditure ...
, revenue,
cheque A cheque, or check (American English; see spelling differences) is a document that orders a bank (or credit union) to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued. The per ...
s, promissory notes,Robert Sabatino Lopez, Irving Woodworth Raymond, Olivia Remie Constable (2001), ''Medieval Trade in the Mediterranean World: Illustrative Documents'', Columbia University Press, .
trusts A trust is a legal relationship in which the holder of a right gives it to another person or entity who must keep and use it solely for another's benefit. In the Anglo-American common law, the party who entrusts the right is known as the " sett ...
(''
waqf A waqf ( ar, وَقْف; ), also known as hubous () or '' mortmain'' property is an inalienable charitable endowment under Islamic law. It typically involves donating a building, plot of land or other assets for Muslim religious or charitabl ...
''), savings accounts,
transactional account A transaction account, also called a checking account, chequing account, current account, demand deposit account, or share draft account at credit unions, is a deposit account held at a bank or other financial institution. It is available to the ...
s, pawning, loaning,
exchange rate In finance, an exchange rate is the rate at which one currency will be exchanged for another currency. Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of ...
s, bankers, money changers,
ledger A ledger is a book or collection of accounts in which account transactions are recorded. Each account has an opening or carry-forward balance, and would record each transaction as either a debit or credit in separate columns, and the ending o ...
s, deposits, assignments, the
double-entry bookkeeping system Double-entry bookkeeping, also known as double-entry accounting, is a method of bookkeeping that relies on a two-sided accounting entry to maintain financial information. Every entry to an account requires a corresponding and opposite entry to ...
, and
lawsuit - A lawsuit is a proceeding by a party or parties against another in the civil court of law. The archaic term "suit in law" is found in only a small number of laws still in effect today. The term "lawsuit" is used in reference to a civil acti ...
s.Ray Spier (2002), "The history of the peer-review process", ''Trends in Biotechnology'' 20 (8), pp. 357–58 57
Organization An organization or organisation ( Commonwealth English; see spelling differences), is an entity—such as a company, an institution, or an association—comprising one or more people and having a particular purpose. The word is derived fro ...
al enterprises similar to
corporation A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and ...
s independent from the
state State may refer to: Arts, entertainment, and media Literature * ''State Magazine'', a monthly magazine published by the U.S. Department of State * ''The State'' (newspaper), a daily newspaper in Columbia, South Carolina, United States * ''Our S ...
also existed in the medieval Islamic world.Said Amir Arjomand (1999), "The Law, Agency, and Policy in Medieval Islamic Society: Development of the Institutions of Learning from the Tenth to the Fifteenth Century", ''Comparative Studies in Society and History'' 41, pp. 263–93.
Cambridge University Press Cambridge University Press is the university press of the University of Cambridge. Granted letters patent by King Henry VIII in 1534, it is the oldest university press in the world. It is also the King's Printer. Cambridge University Pres ...
.
Samir Amin (1978), "The Arab Nation: Some Conclusions and Problems", ''MERIP Reports'' 68, pp. 3–14 , 13 Many of these concepts were adopted and further advanced in medieval Europe from the 13th century onwards.Jairus Banaji (2007), "Islam, the Mediterranean and the rise of capitalism", ''
Historical Materialism Historical materialism is the term used to describe Karl Marx's theory of history. Marx locates historical change in the rise of class societies and the way humans labor together to make their livelihoods. For Marx and his lifetime collaborat ...
'' 15 (1), pp. 47–74,
Brill Publishers Brill Academic Publishers (known as E. J. Brill, Koninklijke Brill, Brill ()) is a Dutch international academic publisher founded in 1683 in Leiden, Netherlands. With offices in Leiden, Boston, Paderborn and Singapore, Brill today publishes ...
.


Islamic India

During the
Muslim rule in India Muslim rule in the Indian subcontinent began in the course of a gradual Muslim conquest in the Indian subcontinent, beginning mainly after the conquest of Sindh and Multan led by Muhammad ibn al-Qasim. Following the perfunctory rule by the Ghazna ...
, realms such as the
Delhi Sultanate The Delhi Sultanate was an Islamic empire based in Delhi that stretched over large parts of the Indian subcontinent for 320 years (1206–1526).
,
Bengal Sultanate The Sultanate of Bengal ( Middle Bengali: শাহী বাঙ্গালা ''Shahī Baṅgala'', Classical Persian: ''Saltanat-e-Bangālah'') was an empire based in Bengal for much of the 14th, 15th and 16th centuries. It was the dominan ...
,
Mughal Empire The Mughal Empire was an early-modern empire that controlled much of South Asia between the 16th and 19th centuries. Quote: "Although the first two Timurid emperors and many of their noblemen were recent migrants to the subcontinent, the d ...
, and the
Kingdom of Mysore The Kingdom of Mysore was a realm in southern India, traditionally believed to have been founded in 1399 in the vicinity of the modern city of Mysore. From 1799 until 1950, it was a princely state, until 1947 in a subsidiary alliance with Br ...
made significant contributions to the South Asian economy. In the 17th century, Emperor
Aurangzeb Muhi al-Din Muhammad (; – 3 March 1707), commonly known as ( fa, , lit=Ornament of the Throne) and by his regnal title Alamgir ( fa, , translit=ʿĀlamgīr, lit=Conqueror of the World), was the sixth emperor of the Mughal Empire, ruling ...
's Sharia based
Fatawa-e-Alamgiri Fatawa 'Alamgiri, also known as Al-Fatawa al-'Alamgiriyya ( ar, الفتاوى العالمگيرية) or Al-Fatawa al-Hindiyya ( ar, الفتاوى الهندية), is a 17th-century sharia based compilation on statecraft, general ethics, milita ...
, played significant role into expanding
India India, officially the Republic of India ( Hindi: ), is a country in South Asia. It is the seventh-largest country by area, the second-most populous country, and the most populous democracy in the world. Bounded by the Indian Ocean on the ...
's economy, surpassing, the world's largest economy becoming the leading manufacturing power in the world, valued over 25% of world GDP, half of which came
Bengal Subah The Bengal Subah ( bn, সুবাহ বাংলা; fa, ), also referred to as Mughal Bengal ( bn, মোগল বাংলা), was the largest subdivision of the Mughal Empire (and later an independent state under the Nawabs of Be ...
, (today's
Bangladesh Bangladesh (}, ), officially the People's Republic of Bangladesh, is a country in South Asia. It is the eighth-most populous country in the world, with a population exceeding 165 million people in an area of . Bangladesh is among the mos ...
and
West Bengal West Bengal (, Bengali: ''Poshchim Bongo'', , abbr. WB) is a state in the eastern portion of India. It is situated along the Bay of Bengal, along with a population of over 91 million inhabitants within an area of . West Bengal is the fou ...
), worth more than the wealth of the entire western Europe, which signaled the period of
proto-industrialization Proto-industrialization is the regional development, alongside commercial agriculture, of rural handicraft production for external markets. The term was introduced in the early 1970s by economic historians who argued that such developments in par ...
, making direct contribution to the world's first
Industrial Revolution The Industrial Revolution was the transition to new manufacturing processes in Great Britain, continental Europe, and the United States, that occurred during the period from around 1760 to about 1820–1840. This transition included going f ...
after the British conquests. Other rulers like
Hyder Ali Hyder Ali ( حیدر علی, ''Haidarālī''; 1720 – 7 December 1782) was the Sultan and ''de facto'' ruler of the Kingdom of Mysore in southern India. Born as Hyder Ali, he distinguished himself as a soldier, eventually drawing the atten ...
and
Tipu Sultan Tipu Sultan (born Sultan Fateh Ali Sahab Tipu, 1 December 1751 – 4 May 1799), also known as the Tiger of Mysore, was the ruler of the Kingdom of Mysore based in South India. He was a pioneer of rocket artillery.Dalrymple, p. 243 He i ...
, undertook progressive economic development technique that established the southern part of India, with some of the world's highest
real wages Real wages are wages adjusted for inflation, or, equivalently, wages in terms of the amount of goods and services that can be bought. This term is used in contrast to nominal wages or unadjusted wages. Because it has been adjusted to account f ...
and
living standards Standard of living is the level of income, comforts and services available, generally applied to a society or location, rather than to an individual. Standard of living is relevant because it is considered to contribute to an individual's quality ...
in the late 18th century. The concepts of
welfare Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specifical ...
and
pension A pension (, from Latin ''pensiō'', "payment") is a fund into which a sum of money is added during an employee's employment years and from which payments are drawn to support the person's retirement from work in the form of periodic payments ...
were present in early
Islamic law Sharia (; ar, شريعة, sharīʿa ) is a body of religious law that forms a part of the Islamic tradition. It is derived from the religious precepts of Islam and is based on the sacred scriptures of Islam, particularly the Quran and the ...
as forms of zakat one of the
Five Pillars of Islam The Five Pillars of Islam (' ; also ' "pillars of the religion") are fundamental practices in Islam, considered to be obligatory acts of worship for all Muslims. They are summarized in the famous hadith of Gabriel. The Sunni and Shia agree on ...
, since the time of the Rashidun caliph Umar in the 7th century. The
tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or ...
es (including zakat and jizya) collected in the
treasury A treasury is either *A government department related to finance and taxation, a finance ministry. *A place or location where treasure, such as currency or precious items are kept. These can be state or royal property, church treasure or ...
(''
bayt al-mal ''Bayt al-mal'' () is an Arabic term that is translated as "House of money" or "House of wealth." Historically, it was a financial institution responsible for the administration of taxes in Islamic states, particularly in the early Islamic Calip ...
'') of an
Islamic government ''Islamic Government'' ( fa, حکومت اسلامی, ''Hokumat-i Eslami''), also known as ''The Jurist's Guardianship: Islamic Government'', ( fa, حکومت اسلامی ولایت فقیه, ''Velayat-e faqih: Hokumat-i Eslami '') Abrahamian, ...
were used to provide income for the needy, including the poor, the elderly, orphans, widows, and the disabled. According to the Islamic jurist
Al-Ghazali Al-Ghazali ( – 19 December 1111; ), full name (), and known in Persian-speaking countries as Imam Muhammad-i Ghazali (Persian: امام محمد غزالی) or in Medieval Europe by the Latinized as Algazelus or Algazel, was a Persian polym ...
(Algazel, 1058–1111), the government was also expected to stockpile food supplies in every region in case of disaster or famine. The Caliphate was thus one of the earliest
welfare state A welfare state is a form of government in which the state (or a well-established network of social institutions) protects and promotes the economic and social well-being of its citizens, based upon the principles of equal opportunity, equitabl ...
s.


Trade

During the Islamic Golden Age, isolated regions had contact with a far-reaching Muslim trade network extending from the Atlantic Ocean and the Mediterranean in the west to the
Indian Ocean The Indian Ocean is the third-largest of the world's five oceanic divisions, covering or ~19.8% of the water on Earth's surface. It is bounded by Asia to the north, Africa to the west and Australia to the east. To the south it is bounded by ...
and South China Sea in the east, and covering most of the
Old World The "Old World" is a term for Afro-Eurasia that originated in Europe , after Europeans became aware of the existence of the Americas. It is used to contrast the continents of Africa, Europe, and Asia, which were previously thought of by th ...
, including significant areas of Asia and Africa and much of Europe, with their trade networks. Arabic silver ''
dirham The dirham, dirhem or dirhm ( ar, درهم) is a silver unit of currency historically and currently used by several Arab and Arab influenced states. The term has also been used as a related unit of mass. Unit of mass The dirham was a un ...
'' coins were being circulated throughout the
Afro-Eurasia Afro-Eurasia (also Afroeurasia, Eurafrasia or the Old World) is a landmass comprising the continents of Africa, Asia, and Europe. The terms are compound words of the names of its constituent parts. Its mainland is the largest and most populo ...
n landmass, as far as
sub-Saharan Africa Sub-Saharan Africa is, geographically, the area and regions of the continent of Africa that lies south of the Sahara. These include West Africa, East Africa, Central Africa, and Southern Africa. Geopolitically, in addition to the List of sov ...
in the south and northern Europe in the north, often in exchange for goods and
slave Slavery and enslavement are both the state and the condition of being a slave—someone forbidden to quit one's service for an enslaver, and who is treated by the enslaver as property. Slavery typically involves slaves being made to per ...
s. This helped establish the
Rashidun , image = تخطيط كلمة الخلفاء الراشدون.png , caption = Calligraphic representation of Rashidun Caliphs , birth_place = Mecca, Hejaz, Arabia present-day Saudi Arabia , known_for = Companions of ...
,
Umayyad The Umayyad Caliphate (661–750 CE; , ; ar, ٱلْخِلَافَة ٱلْأُمَوِيَّة, al-Khilāfah al-ʾUmawīyah) was the second of the four major caliphates established after the death of Muhammad. The caliphate was ruled by the ...
, Abbasid and
Fatimid The Fatimid Caliphate was an Ismaili Shi'a caliphate extant from the tenth to the twelfth centuries AD. Spanning a large area of North Africa, it ranged from the Atlantic Ocean in the west to the Red Sea in the east. The Fatimids, a dyn ...
Caliphates as the world's leading extensive economic powers in the 7th-13th centuries.John M. Hobson (2004), ''The Eastern Origins of Western Civilisation'', p. 29-30,
Cambridge University Press Cambridge University Press is the university press of the University of Cambridge. Granted letters patent by King Henry VIII in 1534, it is the oldest university press in the world. It is also the King's Printer. Cambridge University Pres ...
, .
Due to religious sanctions against debt, Tamil Muslims have historically been money changers (not money lenders) throughout South and South East Asia.


Agriculture in the medieval Islamic world

From the 8th century to the 13th century in Muslim lands many crops and plants were planted along Muslim trade routes, farming techniques spread. In addition to changes in economy, population distribution, vegetation cover, agricultural production, population levels, urban growth, the distribution of the labor force, and numerous other aspects of life in the Islamic world were affected according to Andrew Watson.Andrew M. Watson (1974), "The Arab Agricultural Revolution and Its Diffusion, 700-1100", ''The Journal of Economic History'' 34 (1), p. 8-35. However this is disputed by other scholars, who claim cultivation and consumption of staples such as
durum wheat Durum wheat (), also called pasta wheat or macaroni wheat (''Triticum durum'' or ''Triticum turgidum'' subsp. ''durum''), is a tetraploid species of wheat. It is the second most cultivated species of wheat after common wheat, although it repres ...
, Asiatic rice, and
sorghum ''Sorghum'' () is a genus of about 25 species of flowering plants in the grass family ( Poaceae). Some of these species are grown as cereals for human consumption and some in pastures for animals. One species is grown for grain, while many oth ...
, as well as cotton, were already commonplace centuries before, or that agricultural production declined in areas brought under Muslim rule in the Middle Ages. The
demographics Demography () is the statistical study of populations, especially human beings. Demographic analysis examines and measures the dimensions and dynamics of populations; it can cover whole societies or groups defined by criteria such as ed ...
of medieval Islamic society varied in some significant aspects from other agricultural societies, including a decline in
birth rate The birth rate for a given period is the total number of live human births per 1,000 population divided by the length of the period in years. The number of live births is normally taken from a universal registration system for births; populati ...
s, as well as a change in
life expectancy Life expectancy is a statistical measure of the average time an organism is expected to live, based on the year of its birth, current age, and other demographic factors like sex. The most commonly used measure is life expectancy at birth ...
. Other traditional agrarian societies are estimated to have had an average life expectancy of 20 to 25 years, while
ancient Rome In modern historiography, ancient Rome refers to Roman civilisation from the founding of the city of Rome in the 8th century BC to the collapse of the Western Roman Empire in the 5th century AD. It encompasses the Roman Kingdom (753–509 ...
and medieval Europe are estimated at 20 to 30 years. Conrad I. Lawrence estimates the average lifespan in the early Islamic Caliphate to be above 35 years for the general population, and several studies on the lifespans of
Islamic scholars In Islam, the ''ulama'' (; ar, علماء ', singular ', "scholar", literally "the learned ones", also spelled ''ulema''; feminine: ''alimah'' ingularand ''aalimath'' lural are the guardians, transmitters, and interpreters of religious ...
concluded that members of this occupational group enjoyed a life expectancy between 69 and 75 years, though this longevity was not representative of the general population. The early Islamic Empire also had the highest literacy rates among pre-modern societies, alongside the city of
classical Athens The city of Athens ( grc, Ἀθῆναι, ''Athênai'' .tʰɛ̂ː.nai̯ Modern Greek: Αθήναι, ''Athine'' or, more commonly and in singular, Αθήνα, ''Athina'' .'θi.na during the classical period of ancient Greece (480–323 BC) wa ...
in the 4th century BC, and later,
China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's List of countries and dependencies by population, most populous country, with a Population of China, population exceeding 1.4 billion, slig ...
after the introduction of printing from the 10th century. One factor for the relatively high literacy rates in the early Islamic Empire was its parent-driven educational marketplace, as the state did not systematically subsidize educational services until the introduction of state funding under
Nizam al-Mulk Abu Ali Hasan ibn Ali Tusi (April 10, 1018 – October 14, 1092), better known by his honorific title of Nizam al-Mulk ( fa, , , Order of the Realm) was a Persian scholar, jurist, political philosopher and Vizier of the Seljuk Empire. Rising ...
in the 11th century. Another factor was the diffusion of
paper Paper is a thin sheet material produced by mechanically or chemically processing cellulose fibres derived from wood, rags, grasses or other vegetable sources in water, draining the water through fine mesh leaving the fibre evenly distribut ...
from China, which led to an efflorescence of books and written culture in Islamic society, thus
papermaking Papermaking is the manufacture of paper and cardboard, which are used widely for printing, writing, and packaging, among many other purposes. Today almost all paper is made using industrial machinery, while handmade paper survives as a speciali ...
technology transformed Islamic society (and later, the rest of
Afro-Eurasia Afro-Eurasia (also Afroeurasia, Eurafrasia or the Old World) is a landmass comprising the continents of Africa, Asia, and Europe. The terms are compound words of the names of its constituent parts. Its mainland is the largest and most populo ...
) from an oral to
scribal A scribe is a person who serves as a professional copyist, especially one who made copies of manuscripts before the invention of automatic printing. The profession of the scribe, previously widespread across cultures, lost most of its promi ...
culture, comparable to the later shifts from scribal to
typographic Typography is the art and technique of arranging type to make written language legible, readable and appealing when displayed. The arrangement of type involves selecting typefaces, point sizes, line lengths, line-spacing (leading), and ...
culture, and from typographic culture to the
Internet The Internet (or internet) is the global system of interconnected computer networks that uses the Internet protocol suite (TCP/IP) to communicate between networks and devices. It is a '' network of networks'' that consists of private, p ...
. Other factors include the widespread use of paper books in Islamic society (more so than any other previously existing society), the study and memorization of the Qur' an, flourishing commercial activity, and the emergence of the Maktab and
Madrasah Madrasa (, also , ; Arabic: مدرسة , pl. , ) is the Arabic word for any type of educational institution, secular or religious (of any religion), whether for elementary instruction or higher learning. The word is variously transliterated '' ...
educational institutions.


Islamic capitalism

Early forms of
mercantilism Mercantilism is an economic policy that is designed to maximize the exports and minimize the imports for an economy. It promotes imperialism, colonialism, tariffs and subsidies on traded goods to achieve that goal. The policy aims to reduce a ...
and
capitalism Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, price system, private pr ...
are thought to have developed in the
Islamic Golden Age The Islamic Golden Age was a period of cultural, economic, and scientific flourishing in the history of Islam, traditionally dated from the 8th century to the 14th century. This period is traditionally understood to have begun during the reign ...
from the 9th century. Early Islamic commerce applied a number of concepts and techniques, including
bills of exchange A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time, whose payer is usually named on the document. More specifically, it is a document contemplated by or consisting of a ...
, forms of
partnership A partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, government ...
(''mufawada'') such as
limited partnership A limited partnership (LP) is a form of partnership similar to a general partnership except that while a general partnership must have at least two general partners (GPs), a limited partnership must have at least one GP and at least one limited p ...
s (''mudaraba''), and early forms of
capital Capital may refer to: Common uses * Capital city, a municipality of primary status ** List of national capital cities * Capital letter, an upper-case letter Economics and social sciences * Capital (economics), the durable produced goods used fo ...
(''al-mal''),
capital accumulation Capital accumulation is the dynamic that motivates the pursuit of profit, involving the investment of money or any financial asset with the goal of increasing the initial monetary value of said asset as a financial return whether in the fo ...
(''nama al-mal''),
cheque A cheque, or check (American English; see spelling differences) is a document that orders a bank (or credit union) to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued. The per ...
s, promissory notes,
trusts A trust is a legal relationship in which the holder of a right gives it to another person or entity who must keep and use it solely for another's benefit. In the Anglo-American common law, the party who entrusts the right is known as the " sett ...
(see ''
waqf A waqf ( ar, وَقْف; ), also known as hubous () or '' mortmain'' property is an inalienable charitable endowment under Islamic law. It typically involves donating a building, plot of land or other assets for Muslim religious or charitabl ...
''),
transactional account A transaction account, also called a checking account, chequing account, current account, demand deposit account, or share draft account at credit unions, is a deposit account held at a bank or other financial institution. It is available to the ...
s,
loan In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that de ...
s,
ledger A ledger is a book or collection of accounts in which account transactions are recorded. Each account has an opening or carry-forward balance, and would record each transaction as either a debit or credit in separate columns, and the ending o ...
s and assignments.
Organization An organization or organisation ( Commonwealth English; see spelling differences), is an entity—such as a company, an institution, or an association—comprising one or more people and having a particular purpose. The word is derived fro ...
al enterprises independent of the
state State may refer to: Arts, entertainment, and media Literature * ''State Magazine'', a monthly magazine published by the U.S. Department of State * ''The State'' (newspaper), a daily newspaper in Columbia, South Carolina, United States * ''Our S ...
also existed in the medieval Islamic world, while the agency institution was also introduced. Medieval Europe adopted and developed many of these concepts from the 13th century onwards. A
market economy A market economy is an economic system in which the decisions regarding investment, production and distribution to the consumers are guided by the price signals created by the forces of supply and demand, where all suppliers and consumers a ...
was established in the Islamic world on the basis of an economic system resembling
merchant capitalism Some economic historians use the term merchant capitalism to refer to the earliest phase in the development of capitalism as an economic and social system. However, others argue that mercantilism, which has flourished widely in the world without ...
. Labour promoted
capital formation Capital formation is a concept used in macroeconomics, national accounts and financial economics. Occasionally it is also used in corporate accounts. It can be defined in three ways: *It is a specific statistical concept, also known as net inves ...
in medieval Islamic society, and a considerable number of owners of
monetary Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are a ...
funds Funding is the act of providing resources to finance a need, program, or project. While this is usually in the form of money, it can also take the form of effort or time from an organization or company. Generally, this word is used when a firm uses ...
and
precious metal Precious metals are rare, naturally occurring metallic chemical elements of high economic value. Chemically, the precious metals tend to be less reactive than most elements (see noble metal). They are usually ductile and have a high lustre ...
s developed
financial capital Financial capital (also simply known as capital or equity in finance, accounting and economics) is any economic resource measured in terms of money used by entrepreneurs and businesses to buy what they need to make their products or to provide ...
. The capitalists (''sahib al-mal'') stood at the height of their power between the 9th and 12th centuries, but their influence declined after the arrival of the ''ikta'' ( landowners) and after the state
monopolized A monopoly (from Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situation where a spec ...
production Production may refer to: Economics and business * Production (economics) * Production, the act of manufacturing goods * Production, in the outline of industrial organization, the act of making products (goods and services) * Production as a stat ...
; both these trends hampered any development of industrial capitalism in the Islamic world. Some state enterprises still had a capitalist mode of production, such as
pearl diving Pearl hunting, also known as pearling, is the activity of recovering pearls from wild molluscs, usually oysters or mussels, in the sea or freshwater. Pearl hunting was prevalent in the Persian Gulf region and Japan for thousands of years. On the ...
in
Iraq Iraq,; ku, عێراق, translit=Êraq officially the Republic of Iraq, '; ku, کۆماری عێراق, translit=Komarî Êraq is a country in Western Asia. It is bordered by Turkey to the north, Iran to the east, the Persian Gulf and ...
and the
textile industry The textile industry is primarily concerned with the design, production and distribution of yarn, cloth and clothing. The raw material may be natural, or synthetic using products of the chemical industry. Industry process Cotton manufactu ...
in
Egypt Egypt ( ar, مصر , ), officially the Arab Republic of Egypt, is a transcontinental country spanning the northeast corner of Africa and southwest corner of Asia via a land bridge formed by the Sinai Peninsula. It is bordered by the Medite ...
. From the 11th to the 13th centuries, the " Karimis", an enterprise and
business group A corporate group or group of companies is a collection of parent and subsidiary corporations that function as a single economic entity through a common source of control. These types of groups are often managed by an account manager. The concept ...
controlled by
entrepreneur Entrepreneurship is the creation or extraction of economic value. With this definition, entrepreneurship is viewed as change, generally entailing risk beyond what is normally encountered in starting a business, which may include other values th ...
s, came to dominate much of the Islamic world's economy. The group was controlled by about fifty Muslim
merchant A merchant is a person who trades in commodities produced by other people, especially one who trades with foreign countries. Historically, a merchant is anyone who is involved in business or trade. Merchants have operated for as long as industry ...
s labeled as "Karimis", who were of
Yemen Yemen (; ar, ٱلْيَمَن, al-Yaman), officially the Republic of Yemen,, ) is a country in Western Asia. It is situated on the southern end of the Arabian Peninsula, and borders Saudi Arabia to the north and Oman to the northeast and s ...
i,
Egypt Egypt ( ar, مصر , ), officially the Arab Republic of Egypt, is a transcontinental country spanning the northeast corner of Africa and southwest corner of Asia via a land bridge formed by the Sinai Peninsula. It is bordered by the Medite ...
ian and sometimes Indian origin. Each Karimi merchant had considerable wealth, ranging from at least 100,000
dinar The dinar () is the principal currency unit in several countries near the Mediterranean Sea, and its historical use is even more widespread. The modern dinar's historical antecedents are the gold dinar and the silver dirham, the main coin of ...
s to as much as 10 million dinars. The group had considerable influence in most important eastern markets, and sometimes influenced politics through its financing activities and through a variety of customers, including
Emir Emir (; ar, أمير ' ), sometimes transliterated amir, amier, or ameer, is a word of Arabic origin that can refer to a male monarch, aristocrat, holder of high-ranking military or political office, or other person possessing actual or ce ...
s,
Sultan Sultan (; ar, سلطان ', ) is a position with several historical meanings. Originally, it was an Arabic abstract noun meaning "strength", "authority", "rulership", derived from the verbal noun ', meaning "authority" or "power". Later, it ...
s,
Vizier A vizier (; ar, وزير, wazīr; fa, وزیر, vazīr), or wazir, is a high-ranking political advisor or minister in the near east. The Abbasid caliphs gave the title ''wazir'' to a minister formerly called ''katib'' (secretary), who was a ...
s, foreign merchants, and common consumers. The Karimis dominated many of the
trade routes A trade route is a logistical network identified as a series of pathways and stoppages used for the commercial transport of cargo. The term can also be used to refer to trade over bodies of water. Allowing goods to reach distant markets, a sin ...
across the Mediterranean, the
Red Sea The Red Sea ( ar, البحر الأحمر - بحر القلزم, translit=Modern: al-Baḥr al-ʾAḥmar, Medieval: Baḥr al-Qulzum; or ; Coptic: ⲫⲓⲟⲙ ⲛ̀ϩⲁϩ ''Phiom Enhah'' or ⲫⲓⲟⲙ ⲛ̀ϣⲁⲣⲓ ''Phiom ǹšari''; ...
, and the
Indian Ocean The Indian Ocean is the third-largest of the world's five oceanic divisions, covering or ~19.8% of the water on Earth's surface. It is bounded by Asia to the north, Africa to the west and Australia to the east. To the south it is bounded by ...
, and as far as
Francia Francia, also called the Kingdom of the Franks ( la, Regnum Francorum), Frankish Kingdom, Frankland or Frankish Empire ( la, Imperium Francorum), was the largest post-Roman barbarian kingdom in Western Europe. It was ruled by the Franks dur ...
in the north, China in the east, and
sub-Saharan Africa Sub-Saharan Africa is, geographically, the area and regions of the continent of Africa that lies south of the Sahara. These include West Africa, East Africa, Central Africa, and Southern Africa. Geopolitically, in addition to the List of sov ...
in the south, where they obtained gold from
gold mine Gold Mine may refer to: *Gold Mine (board game) *Gold Mine (Long Beach), an arena *"Gold Mine", a song by Joyner Lucas from the 2020 album ''ADHD'' See also * ''Gold'' (1974 film), based on the novel ''Gold Mine'' by Wilbur Smith *Gold mining ...
s. Practices employed by the Karimis included the use of agents, the financing of
project A project is any undertaking, carried out individually or collaboratively and possibly involving research or design, that is carefully planned to achieve a particular goal. An alternative view sees a project managerially as a sequence of even ...
s as a method of acquiring capital, and a
banking institution Financial institutions, sometimes called banking institutions, are business entities that provide services as intermediaries for different types of financial monetary transactions. Broadly speaking, there are three major types of financial inst ...
for loans and deposits.


Islamic socialism

Though medieval Islamic economics appears to have somewhat resembled a form of capitalism, some arguing that it laid the foundations for the development of modern capitalism, Others see Islamic economics as neither completely capitalistic nor completely
socialistic Socialism is a left-wing economic philosophy and movement encompassing a range of economic systems characterized by the dominance of social ownership of the means of production as opposed to private ownership. As a term, it describes the ec ...
, but rather a balance between the two, emphasizing both "individual economic freedom and the need to serve the common good." Abū Dharr al-Ghifārī, a Companion of Muḥammad, is credited by many as the founder of Islamic
socialism Socialism is a left-wing economic philosophy and movement encompassing a range of economic systems characterized by the dominance of social ownership of the means of production as opposed to private ownership. As a term, it describes the e ...
. The concepts of
welfare Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specifical ...
and
pension A pension (, from Latin ''pensiō'', "payment") is a fund into which a sum of money is added during an employee's employment years and from which payments are drawn to support the person's retirement from work in the form of periodic payments ...
were introduced in early
Islamic law Sharia (; ar, شريعة, sharīʿa ) is a body of religious law that forms a part of the Islamic tradition. It is derived from the religious precepts of Islam and is based on the sacred scriptures of Islam, particularly the Quran and the ...
as forms of ''
Zakat Zakat ( ar, زكاة; , "that which purifies", also Zakat al-mal , "zakat on wealth", or Zakah) is a form of almsgiving, often collected by the Muslim Ummah. It is considered in Islam as a religious obligation, and by Quranic ranking, is n ...
'' (charity), one of the
Five Pillars of Islam The Five Pillars of Islam (' ; also ' "pillars of the religion") are fundamental practices in Islam, considered to be obligatory acts of worship for all Muslims. They are summarized in the famous hadith of Gabriel. The Sunni and Shia agree on ...
, during the time of the
Rashidun , image = تخطيط كلمة الخلفاء الراشدون.png , caption = Calligraphic representation of Rashidun Caliphs , birth_place = Mecca, Hejaz, Arabia present-day Saudi Arabia , known_for = Companions of ...
caliph Umar in the 7th century. This practiced continued well into the era of the
Abbasid Caliphate The Abbasid Caliphate ( or ; ar, الْخِلَافَةُ الْعَبَّاسِيَّة, ') was the third caliphate to succeed the Islamic prophet Muhammad. It was founded by a dynasty descended from Muhammad's uncle, Abbas ibn Abdul-Mutta ...
, as seen under Al-Ma'mun's rule in the 8th century, for example. The
tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or ...
es (including ''Zakat'' and ''
Jizya Jizya ( ar, جِزْيَة / ) is a per capita yearly taxation historically levied in the form of financial charge on dhimmis, that is, permanent non-Muslim subjects of a state governed by Islamic law. The jizya tax has been understood in Isl ...
'') collected in the
treasury A treasury is either *A government department related to finance and taxation, a finance ministry. *A place or location where treasure, such as currency or precious items are kept. These can be state or royal property, church treasure or ...
of an Islamic
government A government is the system or group of people governing an organized community, generally a state. In the case of its broad associative definition, government normally consists of legislature, executive, and judiciary. Government i ...
were used to provide
income Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be different across fields. For ...
for the needy, including the
poor Poverty is the state of having few material possessions or little ,
elderly Old age refers to ages nearing or surpassing the life expectancy of human beings, and is thus the end of the human life cycle. Terms and euphemisms for people at this age include old people, the elderly (worldwide usage), OAPs (British usage ...
,
orphan An orphan (from the el, ορφανός, orphanós) is a child whose parents have died. In common usage, only a child who has lost both parents due to death is called an orphan. When referring to animals, only the mother's condition is usuall ...
s, widows, and the
disabled Disability is the experience of any condition that makes it more difficult for a person to do certain activities or have equitable access within a given society. Disabilities may be cognitive, developmental, intellectual, mental, physical, s ...
. According to the Islamic jurist
Al-Ghazali Al-Ghazali ( – 19 December 1111; ), full name (), and known in Persian-speaking countries as Imam Muhammad-i Ghazali (Persian: امام محمد غزالی) or in Medieval Europe by the Latinized as Algazelus or Algazel, was a Persian polym ...
(Algazel, 1058–1111), the government was also expected to stockpile food supplies in every region in case a
disaster A disaster is a serious problem occurring over a short or long period of time that causes widespread human, material, economic or environmental loss which exceeds the ability of the affected community or society to cope using its own resources ...
or
famine A famine is a widespread scarcity of food, caused by several factors including war, natural disasters, crop failure, population imbalance, widespread poverty, an economic catastrophe or government policies. This phenomenon is usually accompani ...
occurred. The
Caliphate A caliphate or khilāfah ( ar, خِلَافَة, ) is an institution or public office under the leadership of an Islamic steward with the title of caliph (; ar, خَلِيفَة , ), a person considered a political-religious successor to th ...
is thus considered the world's first major
welfare state A welfare state is a form of government in which the state (or a well-established network of social institutions) protects and promotes the economic and social well-being of its citizens, based upon the principles of equal opportunity, equitabl ...
.)


Industrial development

Muslim engineers in the Islamic world were responsible for numerous innovative industrial uses of
hydropower Hydropower (from el, ὕδωρ, "water"), also known as water power, is the use of falling or fast-running water to produce electricity or to power machines. This is achieved by converting the gravitational potential or kinetic energy of a ...
, early industrial uses of
tide mill A tide mill is a water mill driven by tidal rise and fall. A dam with a sluice is created across a suitable tidal inlet, or a section of river estuary is made into a reservoir. As the tide comes in, it enters the mill pond through a one-way gat ...
s,
wind power Wind power or wind energy is mostly the use of wind turbines to generate electricity. Wind power is a popular, sustainable, renewable energy source that has a much smaller impact on the environment than burning fossil fuels. Historically, ...
, and
fossil fuel A fossil fuel is a hydrocarbon-containing material formed naturally in the Earth's crust from the remains of dead plants and animals that is extracted and burned as a fuel. The main fossil fuels are coal, oil, and natural gas. Fossil fuels m ...
s such as
petroleum Petroleum, also known as crude oil, or simply oil, is a naturally occurring yellowish-black liquid mixture of mainly hydrocarbons, and is found in geological formations. The name ''petroleum'' covers both naturally occurring unprocessed crude ...
. A variety of industrial mills were used in the Islamic world, including fulling mills, gristmills, hullers, sawmills, shipmills, stamp mills, steel mills, sugar mills, tide mills, and windmills. By the 11th century, every province throughout the Islamic world had these industrial mills in operation, from al-Andalus and North Africa to the Middle East and Central Asia.Adam Robert Lucas (2005), "Industrial Milling in the Ancient and Medieval Worlds: A Survey of the Evidence for an Industrial Revolution in Medieval Europe", ''Technology and Culture'' 46 (1), pp. 1–30 0 Muslim engineers also employed
water turbine A water turbine is a rotary machine that converts kinetic energy and potential energy of water into mechanical work. Water turbines were developed in the 19th century and were widely used for industrial power prior to electrical grids. Now, th ...
s, and gears in mills and water-raising machines, and pioneered the use of dams as a source of water power, used to provide additional power to watermills and water-raising machines.Ahmad Y Hassan
Transfer Of Islamic Technology To The West, Part II: Transmission Of Islamic Engineering
Such advances made it possible for many industrial tasks that were previously driven by
manual labour Manual labour (in Commonwealth English, manual labor in American English) or manual work is physical work done by humans, in contrast to labour by machines and working animals. It is most literally work done with the hands (the word ''manual ...
in ancient times to be mechanized and driven by machinery instead in the medieval Islamic world. The transfer of these technologies to medieval Europe later laid the foundations for the
Industrial Revolution The Industrial Revolution was the transition to new manufacturing processes in Great Britain, continental Europe, and the United States, that occurred during the period from around 1760 to about 1820–1840. This transition included going f ...
in 18th century Europe. In addition to government-owned ''tiraz'' textile factories, there were also
privately owned enterprise A privately held company (or simply a private company) is a company whose shares and related rights or obligations are not offered for public subscription or publicly negotiated in the respective listed markets, but rather the company's stock is ...
s run largely by landlords who collected taxes and invested them in the textile industry.


Labour force

The
labor force The workforce or labour force is a concept referring to the pool of human beings either in employment or in unemployment. It is generally used to describe those working for a single company or industry, but can also apply to a geographic regi ...
in the
Caliphate A caliphate or khilāfah ( ar, خِلَافَة, ) is an institution or public office under the leadership of an Islamic steward with the title of caliph (; ar, خَلِيفَة , ), a person considered a political-religious successor to th ...
were employed from diverse
ethnic An ethnic group or an ethnicity is a grouping of people who identify with each other on the basis of shared attributes that distinguish them from other groups. Those attributes can include common sets of traditions, ancestry, language, history, ...
and
religious Religion is usually defined as a social-cultural system of designated behaviors and practices, morals, beliefs, worldviews, texts, sanctified places, prophecies, ethics, or organizations, that generally relates humanity to supernatural, ...
backgrounds, while both men and women were involved in diverse occupations and
economic An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with t ...
activities. Women were employed in a wide range of commercial activities and diverse occupations in the primary sector (as farmers for example), secondary sector (as
construction worker A construction worker is a worker employed in the physical construction of the built environment and its infrastructure. Definition By some definitions, workers may be engaged in manual labour as unskilled or semi-skilled workers; they may be s ...
s, dyers, spinners, etc.) and tertiary sector (as investors, doctors,
nurse Nursing is a profession within the health care sector focused on the care of individuals, families, and communities so they may attain, maintain, or recover optimal health and quality of life. Nurses may be differentiated from other health ...
s, presidents of
guild A guild ( ) is an association of artisans and merchants who oversee the practice of their craft/trade in a particular area. The earliest types of guild formed as organizations of tradesmen belonging to a professional association. They sometimes ...
s,
broker A broker is a person or firm who arranges transactions between a buyer and a seller for a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal. Neither role should be confu ...
s,
peddler A peddler, in British English pedlar, also known as a chapman, packman, cheapjack, hawker, higler, huckster, (coster)monger, colporteur or solicitor, is a door-to-door and/or travelling vendor of goods. In England, the term was mostly used f ...
s,
lender A creditor or lender is a party (e.g., person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property ...
s,
scholar A scholar is a person who pursues academic and intellectual activities, particularly academics who apply their intellectualism into expertise in an area of study. A scholar can also be an academic, who works as a professor, teacher, or researc ...
s, etc.). Muslim women also held a
monopoly A monopoly (from Greek language, Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situati ...
over certain branches of the
textile industry The textile industry is primarily concerned with the design, production and distribution of yarn, cloth and clothing. The raw material may be natural, or synthetic using products of the chemical industry. Industry process Cotton manufactu ...
, the largest and most specialized and market-oriented industry at the time, in occupations such as
spinning Spin or spinning most often refers to: * Spinning (textiles), the creation of yarn or thread by twisting fibers together, traditionally by hand spinning * Spin, the rotation of an object around a central axis * Spin (propaganda), an intentional ...
, dyeing, and
embroidery Embroidery is the craft of decorating fabric or other materials using a needle to apply thread or yarn. Embroidery may also incorporate other materials such as pearls, beads, quills, and sequins. In modern days, embroidery is usually seen on ...
. In comparison,
female Female (symbol: ♀) is the sex of an organism that produces the large non-motile ova (egg cells), the type of gamete (sex cell) that fuses with the male gamete during sexual reproduction. A female has larger gametes than a male. Females ...
property rights The right to property, or the right to own property (cf. ownership) is often classified as a human right for natural persons regarding their possessions. A general recognition of a right to private property is found more rarely and is typically ...
and
wage labour Wage labour (also wage labor in American English), usually referred to as paid work, paid employment, or paid labour, refers to the socioeconomic relationship between a worker and an employer in which the worker sells their labour power under a ...
were relatively uncommon in Europe until the
Industrial Revolution The Industrial Revolution was the transition to new manufacturing processes in Great Britain, continental Europe, and the United States, that occurred during the period from around 1760 to about 1820–1840. This transition included going f ...
in the 18th and 19th centuries. The
division of labour The division of labour is the separation of the tasks in any economic system or organisation so that participants may specialise (specialisation). Individuals, organizations, and nations are endowed with, or acquire specialised capabilities, and ...
was diverse and had been evolving over the centuries. During the 8th–11th centuries, there were on average 63 unique occupations in the primary sector of economic activity (
extract An extract is a substance made by extracting a part of a raw material, often by using a solvent such as ethanol, oil or water. Extracts may be sold as tinctures, absolutes or in powder form. The aromatic principles of many spices, nuts, ...
ive), 697 unique occupations in the
secondary sector In macroeconomics, the secondary sector of the economy is an economic sector in the three-sector theory that describes the role of manufacturing. It encompasses industries that produce a finished, usable product or are involved in constructio ...
(
manufacturing Manufacturing is the creation or production of goods with the help of equipment, labor, machines, tools, and chemical or biological processing or formulation. It is the essence of secondary sector of the economy. The term may refer t ...
), and 736 unique occupations in the tertiary sector ( service). By the 12th century, the number of unique occupations in the primary sector and secondary sector decreased to 35 and 679 respectively, while the number of unique occupations in the tertiary sector increased to 1,175. These changes in the division of labour reflect the increased
mechanization Mechanization is the process of changing from working largely or exclusively by hand or with animals to doing that work with machinery. In an early engineering text a machine is defined as follows: In some fields, mechanization includes the ...
and use of
machine A machine is a physical system using power to apply forces and control movement to perform an action. The term is commonly applied to artificial devices, such as those employing engines or motors, but also to natural biological macromolecule ...
ry to replace
manual labour Manual labour (in Commonwealth English, manual labor in American English) or manual work is physical work done by humans, in contrast to labour by machines and working animals. It is most literally work done with the hands (the word ''manual ...
and the increased
standard of living Standard of living is the level of income, comforts and services available, generally applied to a society or location, rather than to an individual. Standard of living is relevant because it is considered to contribute to an individual's quality ...
and
quality of life Quality of life (QOL) is defined by the World Health Organization as "an individual's perception of their position in life in the context of the culture and value systems in which they live and in relation to their goals, expectations, standards ...
of most citizens in the Caliphate. An economic transition occurred during this period, due to the diversity of the service sector being far greater than any other previous or contemporary society, and the high degree of
economic integration Economic integration is the unification of economic policies between different states, through the partial or full abolition of tariff and non-tariff restrictions on trade. The trade-stimulation effects intended by means of economic integrati ...
between the labour force and the
economy An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with th ...
. Islamic society also experienced a change in attitude towards
manual labour Manual labour (in Commonwealth English, manual labor in American English) or manual work is physical work done by humans, in contrast to labour by machines and working animals. It is most literally work done with the hands (the word ''manual ...
. In previous civilizations such as
ancient Greece Ancient Greece ( el, Ἑλλάς, Hellás) was a northeastern Mediterranean civilization, existing from the Greek Dark Ages of the 12th–9th centuries BC to the end of classical antiquity ( AD 600), that comprised a loose collection of cult ...
and in contemporary civilizations such as
early medieval The Early Middle Ages (or early medieval period), sometimes controversially referred to as the Dark Ages, is typically regarded by historians as lasting from the late 5th or early 6th century to the 10th century. They marked the start of the Mi ...
Europe, intellectuals saw manual labour in a negative light and looked down on them with contempt. This resulted in technological stagnation as they did not see the need for
machine A machine is a physical system using power to apply forces and control movement to perform an action. The term is commonly applied to artificial devices, such as those employing engines or motors, but also to natural biological macromolecule ...
ry to replace manual labour. In the Islamic world, however, manual labour was seen in a far more positive light, as intellectuals such as the
Brethren of Purity The Brethren of Purity ( ar, إخوان‌ الصفا, Ikhwān Al-Ṣafā; also The Brethren of Sincerity) were a secret society of Muslim philosophers in Basra, Iraq, in the 9th or 10th century CE. The structure of the organization and the i ...
likened them to a participant in the act of
creation Creation may refer to: Religion *''Creatio ex nihilo'', the concept that matter was created by God out of nothing *Creation myth, a religious story of the origin of the world and how people first came to inhabit it *Creationism, the belief that ...
, while
Ibn Khaldun Ibn Khaldun (; ar, أبو زيد عبد الرحمن بن محمد بن خلدون الحضرمي, ; 27 May 1332 – 17 March 1406, 732-808 AH) was an Arab The Historical Muhammad', Irving M. Zeitlin, (Polity Press, 2007), p. 21; "It is, of ...
alluded to the benefits of manual labour to the progress of society. By the early 10th century, the idea of the
academic degree An academic degree is a qualification awarded to students upon successful completion of a course of study in higher education, usually at a college or university. These institutions commonly offer degrees at various levels, usually including u ...
was introduced and being granted at Maktab schools,
Madrasah Madrasa (, also , ; Arabic: مدرسة , pl. , ) is the Arabic word for any type of educational institution, secular or religious (of any religion), whether for elementary instruction or higher learning. The word is variously transliterated '' ...
colleges and
Bimaristan A bimaristan (; ), also known as ''dar al-shifa'' (also ''darüşşifa'' in Turkish) or simply maristan, is a hospital in the historic Islamic world. Etymology ''Bimaristan'' is a Persian word ( ''bīmārestān'') meaning "hospital", with ' ...
hospitals. In the medical field in particular, the ''
Ijazah An ''ijazah'' ( ar, الإِجازَة, "permission", "authorization", "license"; plural: ''ijazahs'' or ''ijazat'') is a license authorizing its holder to transmit a certain text or subject, which is issued by someone already possessing such au ...
'' certificate was granted to those qualified to be practicing physicians, in order to differentiate them from unqualified quacks.


Urbanization

There was a significant increase in
urbanization Urbanization (or urbanisation) refers to the population shift from rural to urban areas, the corresponding decrease in the proportion of people living in rural areas, and the ways in which societies adapt to this change. It is predominantly th ...
during this period, due to numerous scientific advances in fields such as agriculture,
hygiene Hygiene is a series of practices performed to preserve health. According to the World Health Organization (WHO), "Hygiene refers to conditions and practices that help to maintain health and prevent the spread of diseases." Personal hygiene refer ...
,
sanitation Sanitation refers to public health conditions related to clean drinking water and treatment and disposal of human excreta and sewage. Preventing human contact with feces is part of sanitation, as is hand washing with soap. Sanitation system ...
,
astronomy Astronomy () is a natural science that studies celestial objects and phenomena. It uses mathematics, physics, and chemistry in order to explain their origin and evolution. Objects of interest include planets, moons, stars, nebulae, gala ...
,
medicine Medicine is the science and practice of caring for a patient, managing the diagnosis, prognosis, prevention, treatment, palliation of their injury or disease, and promoting their health. Medicine encompasses a variety of health care p ...
and
engineering Engineering is the use of scientific principles to design and build machines, structures, and other items, including bridges, tunnels, roads, vehicles, and buildings. The discipline of engineering encompasses a broad range of more speciali ...
. This also resulted in a rising
middle class The middle class refers to a class of people in the middle of a social hierarchy, often defined by occupation, income, education, or social status. The term has historically been associated with modernity, capitalism and political debate. Co ...
population. The head of the family was given the position of authority in his household, although a
qadi A qāḍī ( ar, قاضي, Qāḍī; otherwise transliterated as qazi, cadi, kadi, or kazi) is the magistrate or judge of a '' sharīʿa'' court, who also exercises extrajudicial functions such as mediation, guardianship over orphans and mino ...
, or judge was able to negotiate and resolve differences in issues of disagreements within families and between them. The two senior representatives of municipal authority were the qadi and the
muhtasib A muḥtasib ( ar, محتسب, from the root ''ḥisbah'', or "accountability"Sami Zubaida (2005), Law and Power in the Islamic World, , pages 58-60) was "a holder of the office of al-hisbah in classical Islamic administrations", according to Ox ...
, who held the responsibilities of many issues, including quality of water, maintenance of city streets, containing outbreaks of disease, supervising the markets, and a prompt burial of the dead. Another aspect of Islamic urban life was
waqf A waqf ( ar, وَقْف; ), also known as hubous () or '' mortmain'' property is an inalienable charitable endowment under Islamic law. It typically involves donating a building, plot of land or other assets for Muslim religious or charitabl ...
, a religious charity directly dealing with the qadi and religious leaders. Through donations, the waqf owned many of the
public bath Public baths originated when most people in population centers did not have access to private bathing facilities. Though termed "public", they have often been restricted according to gender, religious affiliation, personal membership, and other cr ...
s and factories, using the revenue to fund education, and to provide irrigation for orchards outside the city. Following expansion, this system was introduced into Eastern Europe by Ottoman Turks. Taxes were also levied on an unmarried man until he was wed. Non-Muslims were required to pay the
jizya Jizya ( ar, جِزْيَة / ) is a per capita yearly taxation historically levied in the form of financial charge on dhimmis, that is, permanent non-Muslim subjects of a state governed by Islamic law. The jizya tax has been understood in Isl ...
, an administrative tax on non-Muslims analogous to zakat (a Muslim only tax). The Jizya was applied only to young able-bodied adult males and exempted non-Muslims from military service. The Muslim state would then be responsible for the administration & security of the Non-Muslims.


Classical Islamic economic thought

To some degree, the early Muslims based their
economic An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with t ...
analyses on the
Qur'an The Quran (, ; Standard Arabic: , Quranic Arabic: , , 'the recitation'), also romanized Qur'an or Koran, is the central religious text of Islam, believed by Muslims to be a revelation from God. It is organized in 114 chapters (pl.: , si ...
(such as opposition to ''
riba The Royal Institute of British Architects (RIBA) is a professional body for architects primarily in the United Kingdom, but also internationally, founded for the advancement of architecture under its royal charter granted in 1837, three suppl ...
'', meaning
usury Usury () is the practice of making unethical or immoral monetary loans that unfairly enrich the lender. The term may be used in a moral sense—condemning taking advantage of others' misfortunes—or in a legal sense, where an interest rate is ch ...
or
interest In finance and economics, interest is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is disti ...
), and from
sunnah In Islam, , also spelled ( ar, سنة), are the traditions and practices of the Islamic prophet Muhammad that constitute a model for Muslims to follow. The sunnah is what all the Muslims of Muhammad's time evidently saw and followed and passed ...
, the sayings and doings of
Muhammad Muhammad ( ar, مُحَمَّد;  570 – 8 June 632 CE) was an Arab religious, social, and political leader and the founder of Islam. According to Islamic doctrine, he was a prophet divinely inspired to preach and confirm the mono ...
.


Early Islamic economic thinkers

Al-Ghazali Al-Ghazali ( – 19 December 1111; ), full name (), and known in Persian-speaking countries as Imam Muhammad-i Ghazali (Persian: امام محمد غزالی) or in Medieval Europe by the Latinized as Algazelus or Algazel, was a Persian polym ...
(1058–1111) classified economics as one of the sciences connected with religion, along with metaphysics, ethics, and psychology. Authors have noted, however, that this connection has not caused early Muslim economic thought to remain static. Iranian philosopher Nasir al-Din al-Tusi (1201–1274) presents an early definition of economics (what he calls hekmat-e-madani, the science of city life) in discourse three of his ''Ethics'': Many scholars trace the
history of economic thought History (derived ) is the systematic study and the documentation of the human activity. The time period of event before the invention of writing systems is considered prehistory. "History" is an umbrella term comprising past events as well ...
through the Muslim world, which was in a Golden Age from the 8th to 13th century and whose
philosophy Philosophy (from , ) is the systematized study of general and fundamental questions, such as those about existence, reason, knowledge, values, mind, and language. Such questions are often posed as problems to be studied or resolved. S ...
continued the work of the
Greek Greek may refer to: Greece Anything of, from, or related to Greece, a country in Southern Europe: *Greeks, an ethnic group. *Greek language, a branch of the Indo-European language family. **Proto-Greek language, the assumed last common ancestor ...
and
Hellenistic In Classical antiquity, the Hellenistic period covers the time in Mediterranean history after Classical Greece, between the death of Alexander the Great in 323 BC and the emergence of the Roman Empire, as signified by the Battle of Actium in 3 ...
thinkers and came to influence Aquinas when Europe "rediscovered" Greek philosophy through Arabic translation. A common theme among these scholars was the praise of economic activity and even self-interested accumulation of wealth. Persian philosopher Ibn Miskawayh (b. 1030) notes: This view is in conflict with an idea
Joseph Schumpeter Joseph Alois Schumpeter (; February 8, 1883 – January 8, 1950) was an Austrian-born political economist. He served briefly as Finance Minister of German-Austria in 1919. In 1932, he emigrated to the United States to become a professor at H ...
called the great gap. The great gap thesis comes out of Schumpeter's 1954 ''History of Economic Analysis'' which discusses a break in economic thought during the five hundred-year period between the decline of the Greco-Roman civilizations and the work of Thomas Aquinas (1225–1274). However, in 1964, Joseph Spengler's "Economic Thought of Islam: Ibn Khaldun" appeared in the journal ''Comparative Studies in Society and History'' and took a large step in bringing early Muslim scholars to the attention of the contemporary West. The influence of earlier
Greek Greek may refer to: Greece Anything of, from, or related to Greece, a country in Southern Europe: *Greeks, an ethnic group. *Greek language, a branch of the Indo-European language family. **Proto-Greek language, the assumed last common ancestor ...
and Hellenistic thought on the Muslim world began largely with
Abbasid The Abbasid Caliphate ( or ; ar, الْخِلَافَةُ الْعَبَّاسِيَّة, ') was the third caliphate to succeed the Islamic prophet Muhammad. It was founded by a dynasty descended from Muhammad's uncle, Abbas ibn Abdul-Muttalib ...
caliph A caliphate or khilāfah ( ar, خِلَافَة, ) is an institution or public office under the leadership of an Islamic steward with the title of caliph (; ar, خَلِيفَة , ), a person considered a political-religious successor to th ...
al-Ma'mun, who sponsored the translation of
Greek Greek may refer to: Greece Anything of, from, or related to Greece, a country in Southern Europe: *Greeks, an ethnic group. *Greek language, a branch of the Indo-European language family. **Proto-Greek language, the assumed last common ancestor ...
texts into
Arabic Arabic (, ' ; , ' or ) is a Semitic language spoken primarily across the Arab world.Semitic languages: an international handbook / edited by Stefan Weninger; in collaboration with Geoffrey Khan, Michael P. Streck, Janet C. E.Watson; Walter ...
in the 9th century by
Syria Syria ( ar, سُورِيَا or سُورِيَة, translit=Sūriyā), officially the Syrian Arab Republic ( ar, الجمهورية العربية السورية, al-Jumhūrīyah al-ʻArabīyah as-Sūrīyah), is a Western Asian country loc ...
n
Christians Christians () are people who follow or adhere to Christianity, a monotheistic Abrahamic religion based on the life and teachings of Jesus Christ. The words ''Christ'' and ''Christian'' derive from the Koine Greek title ''Christós'' (Χρ ...
in
Baghdad Baghdad (; ar, بَغْدَاد , ) is the capital of Iraq and the second-largest city in the Arab world after Cairo. It is located on the Tigris near the ruins of the ancient city of Babylon and the Sassanid Persian capital of Ctesip ...
. But already by that time numerous Muslim scholars had written on economic issues, and early Muslim leaders had shown sophisticated attempts to enforce fiscal and monetary financing, use deficit financing, use taxes to encourage production, the use of credit instruments for banking, including rudimentary savings and checking accounts, and contract law. Among the earliest Muslim economic thinkers was
Abu Yusuf Ya'qub ibn Ibrahim al-Ansari () better known as Abu Yusuf ( ar, أبو يوسف, Abū Yūsuf) (d.798) was a student of jurist Abu Hanifa (d.767) who helped spread the influence of the Hanafi school of Islamic law through his writings and the gove ...
(731-798), a student of the founder of the Hanafi Sunni School of Islamic thought, Abu Hanifah. Abu Yusuf was chief jurist for Abbasid Caliph
Harun al-Rashid Abu Ja'far Harun ibn Muhammad al-Mahdi ( ar , أبو جعفر هارون ابن محمد المهدي) or Harun ibn al-Mahdi (; or 766 – 24 March 809), famously known as Harun al-Rashid ( ar, هَارُون الرَشِيد, translit=Hārūn ...
, for whom he wrote the ''Book of Taxation'' (''Kitab al-Kharaj''). This book outlined Abu Yusuf's ideas on taxation, public finance, and agricultural production. He discussed proportional tax on produce instead of fixed taxes on property as being superior as an incentive to bring more land into cultivation. He also advocated forgiving tax policies which favor the producer and a centralized tax administration to reduce corruption. Abu Yusuf favored the use of tax revenues for socioeconomic infrastructure, and included discussion of various types of taxes, including sales tax, death taxes, and import tariffs. Early discussion of the benefits of division of labor are included in the writings of Qabus,
al-Ghazali Al-Ghazali ( – 19 December 1111; ), full name (), and known in Persian-speaking countries as Imam Muhammad-i Ghazali (Persian: امام محمد غزالی) or in Medieval Europe by the Latinized as Algazelus or Algazel, was a Persian polym ...
,
al-Farabi Abu Nasr Muhammad Al-Farabi ( fa, ابونصر محمد فارابی), ( ar, أبو نصر محمد الفارابي), known in the West as Alpharabius; (c. 872 – between 14 December, 950 and 12 January, 951)PDF version was a renowned early Is ...
(873–950),
Ibn Sina Ibn Sina ( fa, ابن سینا; 980 – June 1037 CE), commonly known in the West as Avicenna (), was a Persian polymath who is regarded as one of the most significant physicians, astronomers, philosophers, and writers of the Islamic ...
(Avicenna) (980–1037), Ibn Miskawayh, Nasir al-Din al-Tusi (1201–74),
Ibn Khaldun Ibn Khaldun (; ar, أبو زيد عبد الرحمن بن محمد بن خلدون الحضرمي, ; 27 May 1332 – 17 March 1406, 732-808 AH) was an Arab The Historical Muhammad', Irving M. Zeitlin, (Polity Press, 2007), p. 21; "It is, of ...
(1332–1406), and Asaad Davani (b. 1444). Among them, the discussions included division of labor within households, societies, factories, and among nations. Farabi notes that each society lacks at least some necessary resources, and thus an optimal society can only be achieved where domestic, regional, and international trade occur, and that such trade can be beneficial to all parties involved. Ghazali was also noted for his subtle understanding of monetary theory and formulation of another version of
Gresham's Law In economics, Gresham's law is a monetary principle stating that "bad money drives out good". For example, if there are two forms of commodity money in circulation, which are accepted by law as having similar face value, the more valuable co ...
. The power of
supply and demand In microeconomics, supply and demand is an economic model of price determination in a market. It postulates that, holding all else equal, in a competitive market, the unit price for a particular good, or other traded item such as labor ...
was understood to some extent by various early Muslim scholars as well.
Ibn Taymiyyah Ibn Taymiyyah (January 22, 1263 – September 26, 1328; ar, ابن تيمية), birth name Taqī ad-Dīn ʾAḥmad ibn ʿAbd al-Ḥalīm ibn ʿAbd al-Salām al-Numayrī al-Ḥarrānī ( ar, تقي الدين أحمد بن عبد الحليم � ...
illustrates: Ibn Taymiyyah also elaborated on a circumstantial analysis of the market mechanism, with a theoretical insight unusual in his time. His discourses on the welfare advantages and disadvantages of market regulation and deregulation have an almost contemporary ring to them. Ghazali suggests an early version of price inelasticity of demand for certain goods, and he and Ibn Miskawayh discuss equilibrium prices. Other important Muslim scholars who wrote about economics include
al-Mawardi Abū al-Ḥasan ʿAlī Ibn Muḥammad al-Māwardī (), known in Latin as Alboacen (972–1058 CE), was an Islamic jurist of the Shafi'i school most remembered for his works on religion, government, the caliphate, and public and constitutional law ...
(1075–1158), Ibn Taimiyah (1263–1328), and
al-Maqrizi Al-Maqrīzī or Maḳrīzī (Arabic: ), whose full name was Taqī al-Dīn Abū al-'Abbās Aḥmad ibn 'Alī ibn 'Abd al-Qādir ibn Muḥammad al-Maqrīzī (Arabic: ) (1364–1442) was a medieval Egyptian Arab historian during the Mamluk era, kn ...
.


Ibn Khaldun

Perhaps the best known Islamic scholar who wrote about economics was Ibn Khaldun of
Tunisia ) , image_map = Tunisia location (orthographic projection).svg , map_caption = Location of Tunisia in northern Africa , image_map2 = , capital = Tunis , largest_city = capital , ...
(1332–1406), who is considered a forerunner of modern economists. Ibn Khaldun wrote on economic and political theory in the introduction, or ''
Muqaddimah The ''Muqaddimah'', also known as the ''Muqaddimah of Ibn Khaldun'' ( ar, مقدّمة ابن خلدون) or ''Ibn Khaldun's Prolegomena'' ( grc, Προλεγόμενα), is a book written by the Arab historian Ibn Khaldun in 1377 which records ...
'' (''Prolegomena''), of his ''History of the World'' (''Kitab al-Ibar''). In the book, he discussed what he called ''asabiyya'' (social cohesion), which he sourced as the cause of some civilizations becoming great and others not. Ibn Khaldun felt that many social forces are cyclic, although there can be sudden sharp turns that break the pattern. His idea about the benefits of the division of labor also relate to ''asabiyya'', the greater the social cohesion, the more complex the successful division may be, the greater the economic growth. He noted that growth and development positively stimulates both supply and demand and that the forces of supply and demand are what determines the prices of goods. He also noted macroeconomic forces of population growth,
human capital Human capital is a concept used by social scientists to designate personal attributes considered useful in the production process. It encompasses employee knowledge, skills, know-how, good health, and education. Human capital has a substantial ...
development, and technological developments effects on development. In fact, Ibn Khaldun thought that population growth was directly a function of wealth. Although he understood that money served as a standard of value, a medium of exchange, and a preserver of value, he did not realize that the value of gold and silver changed based on the forces of supply and demand. He also introduced the concept known as the Khaldun-Laffer Curve (the relationship between tax rates and tax revenue increases as tax rates increase for a while, but then the increases in tax rates begin to cause a decrease in tax revenues as the taxes to impose too great a cost to producers in the economy). Ibn Khaldun introduced the
labor theory of value The labor theory of value (LTV) is a theory of value that argues that the economic value of a good or service is determined by the total amount of " socially necessary labor" required to produce it. The LTV is usually associated with Marxian e ...
. He described labor as the source of value, necessary for all earnings and capital accumulation, obvious in the case of craft. He argued that even if earning "results from something other than a craft, the value of the resulting profit and acquired (capital) must (also) include the value of the labor by which it was obtained. Without labor, it would not have been acquired."I. M. Oweiss (1988), "Ibn Khaldun, the Father of Economics", ''Arab Civilization: Challenges and Responses'',
New York University Press New York University Press (or NYU Press) is a university press that is part of New York University. History NYU Press was founded in 1916 by the then chancellor of NYU, Elmer Ellsworth Brown. Directors * Arthur Huntington Nason, 1916–193 ...
, .
His theory of ''asabiyyah'' has often been compared to modern
Keynesian economics Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output ...
, with Ibn Khaldun's theory clearly containing the concept of the multiplier. A crucial difference, however, is that whereas for
John Maynard Keynes John Maynard Keynes, 1st Baron Keynes, ( ; 5 June 1883 – 21 April 1946), was an English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in ...
it is the
middle class The middle class refers to a class of people in the middle of a social hierarchy, often defined by occupation, income, education, or social status. The term has historically been associated with modernity, capitalism and political debate. Co ...
's greater propensity to save that is to blame for
economic depression An economic depression is a period of carried long-term economical downturn that is result of lowered economic activity in one major or more national economies. Economic depression maybe related to one specific country were there is some economic ...
, for Ibn Khaldun it is the governmental propensity to save at times when
investment Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing is ...
opportunities do not take up the slack which leads to
aggregate demand In macroeconomics, aggregate demand (AD) or domestic final demand (DFD) is the total demand for final goods and services in an economy at a given time. It is often called effective demand, though at other times this term is distinguished. This is ...
. Another modern economic theory anticipated by Ibn Khaldun is
supply-side economics Supply-side economics is a macroeconomic theory that postulates economic growth can be most effectively fostered by lowering taxes, decreasing regulation, and allowing free trade. According to supply-side economics, consumers will benefit f ...
. He "argued that high
tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or ...
es were often a factor in causing empires to collapse, with the result that lower revenue was collected from high rates." He wrote:


Post-colonial era

During the modern
post-colonial Postcolonialism is the critical academic study of the cultural, political and economic legacy of colonialism and imperialism, focusing on the impact of human control and exploitation of colonized people and their lands. More specifically, it is ...
era, as Western ideas, including Western economics, began to influence the Muslim world, some Muslim writers sought to produce an Islamic discipline of economics. In the 1960s and 70s Shia Islamic thinkers worked to develop a unique Islamic economic philosophy with "its answers to contemporary economic problems." Several works were particularly influential, *''slam VA Malekiyyat'' (Islam and Property) by Mahmud Taleqani (1951), *''
Iqtisaduna ''Our Economy'' (, ) is a major work in Arabic on Islamic economics by prominent Shia cleric Muhammad Baqir al-Sadr. Muhammad Baqir Al-Sadr was born on Kadhimiyeh, Baghdad in 1935. The book was written between 1960 and 1961, and published in 1 ...
'' (Our Economics) by
Mohammad Baqir al-Sadr Muhammad Baqir al-Sadr ( ar, آية الله العظمى السيد محمد باقر الصدر; 1 March 1935 – 9 April 1980), also known as al-Shahīd al-Khāmis (the fifth martyr), was an Iraqi philosopher, and the ideological founde ...
(1961) and *''Eqtesad-e Towhidi'' (The Economics of Divine Harmony) by Abolhassan Banisadr (1978) *''Some Interpretations of Property Rights, Capital, and Labor from Islamic Perspective'' by Habibullah Peyman (1979).Revolutionary Surge and Quiet Demise of Islamic Economics in Iran
Al-Sadr, in particular, has been described as having "almost single-handedly developed the notion of Islamic economics" In their writings, Sadr and the other
Shia Shīʿa Islam or Shīʿīsm is the second-largest branch of Islam. It holds that the Islamic prophet Muhammad designated ʿAlī ibn Abī Ṭālib as his successor (''khalīfa'') and the Imam (spiritual and political leader) after him, mos ...
authors "sought to depict Islam as a religion committed to social justice, the equitable distribution of wealth, and the cause of the deprived classes", with doctrines "acceptable to Islamic jurists", while refuting existing non-Islamic theories of
capitalism Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, price system, private pr ...
and
Marxism Marxism is a left-wing to far-left method of socioeconomic analysis that uses a materialist interpretation of historical development, better known as historical materialism, to understand class relations and social conflict and a dialec ...
. This version of Islamic economics, which influenced the
Iranian Revolution The Iranian Revolution ( fa, انقلاب ایران, Enqelâb-e Irân, ), also known as the Islamic Revolution ( fa, انقلاب اسلامی, Enqelâb-e Eslâmī), was a series of events that culminated in the overthrow of the Pahlavi dynas ...
, called for public ownership of land and large "industrial enterprises", while private economic activity continued "within reasonable limits." These ideas helped shape the large public sector and public subsidy policies of the Iranian Islamic revolution. In the 1980s and 1990s, as the
Iranian revolution The Iranian Revolution ( fa, انقلاب ایران, Enqelâb-e Irân, ), also known as the Islamic Revolution ( fa, انقلاب اسلامی, Enqelâb-e Eslâmī), was a series of events that culminated in the overthrow of the Pahlavi dynas ...
failed to reach the per capita income level achieved by the regime it overthrew, and Communist states and socialist parties in the non-Muslim world turned away from
socialism Socialism is a left-wing economic philosophy and movement encompassing a range of economic systems characterized by the dominance of social ownership of the means of production as opposed to private ownership. As a term, it describes the e ...
, Muslim interest shifted away from government ownership and regulation. In Iran, it is reported that "''entered-e Islami'' (meaning both Islamic economics and economy) ... once a revolutionary shibboleth is indubitably absent in all official documents and the media. It disappeared from Iranian political discourse about 15 years ago
990 Year 990 (Roman numerals, CMXC) was a common year starting on Wednesday (link will display the full calendar) of the Julian calendar. Events By place Europe * Almanzor, Al-Mansur, ''de facto'' ruler of Al-Andalus, conquers the Castle ...
" But in other parts of the Muslim world, the term lived on, shifting form to the less ambitious goal of interest-free banking. Some Muslim bankers and religious leaders suggested ways to integrate Islamic law on the usage of money with modern concepts of
ethical Ethics or moral philosophy is a branch of philosophy that "involves systematizing, defending, and recommending concepts of right and wrong behavior".''Internet Encyclopedia of Philosophy'' The field of ethics, along with aesthetics, concerns ma ...
investing Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing is ...
. In banking, this was done through the use of sales transactions (focusing on the fixed rate return modes) to achieve similar results to interest. This has been criticized by some western writers as a means of covering conventional banking with an Islamic facade.


Contemporary economics

In modern times, economic policies of the 1979
Islamic Revolution The Iranian Revolution ( fa, انقلاب ایران, Enqelâb-e Irân, ), also known as the Islamic Revolution ( fa, انقلاب اسلامی, Enqelâb-e Eslâmī), was a series of events that culminated in the overthrow of the Pahlavi dynas ...
in predominantly
Shia Shīʿa Islam or Shīʿīsm is the second-largest branch of Islam. It holds that the Islamic prophet Muhammad designated ʿAlī ibn Abī Ṭālib as his successor (''khalīfa'') and the Imam (spiritual and political leader) after him, mos ...
Iran Iran, officially the Islamic Republic of Iran, and also called Persia, is a country located in Western Asia. It is bordered by Iraq and Turkey to the west, by Azerbaijan and Armenia to the northwest, by the Caspian Sea and Tu ...
were heavily statist with a very large public sector, and official rhetoric celebrating revolution and the rights of the dispossessed, although this tendency has faded over time. In
Sudan Sudan ( or ; ar, السودان, as-Sūdān, officially the Republic of the Sudan ( ar, جمهورية السودان, link=no, Jumhūriyyat as-Sūdān), is a country in Northeast Africa. It shares borders with the Central African Republic ...
, the policies of the National Islamic Front party dominated regime in the 1990s have been the reverse, employing
economic liberalism Economic liberalism is a political and economic ideology that supports a market economy based on individualism and private property in the means of production. Adam Smith is considered one of the primary initial writers on economic liberalism, ...
and accepting "market forces in the formulation of state policies." In
Algeria ) , image_map = Algeria (centered orthographic projection).svg , map_caption = , image_map2 = , capital = Algiers , coordinates = , largest_city = capital , relig ...
,
Jordan Jordan ( ar, الأردن; tr. ' ), officially the Hashemite Kingdom of Jordan,; tr. ' is a country in Western Asia. It is situated at the crossroads of Asia, Africa, and Europe, within the Levant region, on the East Bank of the Jordan Rive ...
,
Egypt Egypt ( ar, مصر , ), officially the Arab Republic of Egypt, is a transcontinental country spanning the northeast corner of Africa and southwest corner of Asia via a land bridge formed by the Sinai Peninsula. It is bordered by the Medite ...
, and
Pakistan Pakistan ( ur, ), officially the Islamic Republic of Pakistan ( ur, , label=none), is a country in South Asia. It is the world's fifth-most populous country, with a population of almost 243 million people, and has the world's second-la ...
, Islamist parties have supported
populist Populism refers to a range of political stances that emphasize the idea of "the people" and often juxtapose this group against " the elite". It is frequently associated with anti-establishment and anti-political sentiment. The term develope ...
policies, showing a "marked reluctance to adopt austerity policies and decreased subsidies." In recent years, Turkey had a rapidly growing
economy An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with th ...
and became a developed country according to the
CIA The Central Intelligence Agency (CIA ), known informally as the Agency and historically as the Company, is a civilian foreign intelligence service of the federal government of the United States, officially tasked with gathering, processing, ...
.
Indonesia Indonesia, officially the Republic of Indonesia, is a country in Southeast Asia and Oceania between the Indian and Pacific oceans. It consists of over 17,000 islands, including Sumatra, Java, Sulawesi, and parts of Borneo and New Guine ...
,
Saudi Arabia Saudi Arabia, officially the Kingdom of Saudi Arabia (KSA), is a country in Western Asia. It covers the bulk of the Arabian Peninsula, and has a land area of about , making it the List of Asian countries by area, fifth-largest country in Asia ...
and Turkey are members of the G-20 major economies. In 2008, at least $500 billion in assets around the world were managed by
Sharia Sharia (; ar, شريعة, sharīʿa ) is a body of religious law that forms a part of the Islamic tradition. It is derived from the religious precepts of Islam and is based on the sacred scriptures of Islam, particularly the Quran and th ...
, or Islamic law, and the sector was growing at more than 10% per year. Islamic finance seeks to promote social justice by banning exploitative practices. In reality, this boils down to a set of prohibitions—on paying interest, on gambling with derivatives and options, and on investing in firms that make pornography or pork. Another form of modern finance that originated from the Muslim world is
microcredit :''This article is specific to small loans, often provided in a pooled manner. For direct payments to individuals for specific projects, see Micropatronage. For financial services to the poor, see Microfinance. For small payments, see Micropayme ...
and
microfinance Microfinance is a category of financial services targeting individuals and small businesses who lack access to conventional banking and related services. Microfinance includes microcredit, the provision of small loans to poor clients; savings ...
. It began in the 1970s in
Bangladesh Bangladesh (}, ), officially the People's Republic of Bangladesh, is a country in South Asia. It is the eighth-most populous country in the world, with a population exceeding 165 million people in an area of . Bangladesh is among the mos ...
with Grameen Bank, founded by
Muhammad Yunus Muhammad Yunus (born 28 June 1940) is a Bangladeshi social entrepreneur, banker, economist and civil society leader who was awarded the Nobel Peace Prize for founding the Grameen Bank and pioneering the concepts of microcredit and microfinan ...
, recipient of the 2006
Nobel Peace Prize The Nobel Peace Prize is one of the five Nobel Prizes established by the will of Swedish industrialist, inventor and armaments (military weapons and equipment) manufacturer Alfred Nobel, along with the prizes in Chemistry, Physics, Physiology ...
. Among 6 representative studies selected from a sample of more than 100 studies as being methodologically most sound, five found no evidence that microcredit reduced poverty.


Land reform

One issue "generally absent" from contemporary Islamist economic thought (except
Sayyid Qutb Sayyid 'Ibrāhīm Ḥusayn Quṭb ( or ; , ; ar, سيد قطب إبراهيم حسين ''Sayyid Quṭb''; 9 October 1906 – 29 August 1966), known popularly as Sayyid Qutb ( ar, سيد قطب), was an Egyptian author, educator, Islamic ...
) and action "whether moderate or radical" is the question of
agrarian reform Agrarian reform can refer either, narrowly, to government-initiated or government-backed redistribution of agricultural land (see land reform) or, broadly, to an overall redirection of the agrarian system of the country, which often includes land r ...
. Opposition to agrarian reform even played a role in Islamist uprisings (Iran 1963, Afghanistan, 1978). At least one observer ( Olivier Roy) believes this is primarily because it would "imply a reexamination of the concept of ownership", and in particular "throw into question the
Waqf A waqf ( ar, وَقْف; ), also known as hubous () or '' mortmain'' property is an inalienable charitable endowment under Islamic law. It typically involves donating a building, plot of land or other assets for Muslim religious or charitabl ...
, endowments whose revenue ensures the functioning of religious institutions." In the Islamic Republic of
Iran Iran, officially the Islamic Republic of Iran, and also called Persia, is a country located in Western Asia. It is bordered by Iraq and Turkey to the west, by Azerbaijan and Armenia to the northwest, by the Caspian Sea and Tu ...
, for example, waqf holdings are very large (in Khorasan Province, "50% of the cultivated lands belong to the religious foundation Astan-i Quds, which oversees" the Imam Reza shrine in
Mashhad Mashhad ( fa, مشهد, Mašhad ), also spelled Mashad, is the second-most-populous city in Iran, located in the relatively remote north-east of the country about from Tehran. It serves as the capital of Razavi Khorasan Province and has a ...
). Thus questioning waqf property would mean questioning "the foundation of the financial autonomy of the mullahs and mosques", particularly among
Shia Shīʿa Islam or Shīʿīsm is the second-largest branch of Islam. It holds that the Islamic prophet Muhammad designated ʿAlī ibn Abī Ṭālib as his successor (''khalīfa'') and the Imam (spiritual and political leader) after him, mos ...
Muslims.


Islamic stock index

In June 2005, the
Dow Jones Dow Jones is a combination of the names of business partners Charles Dow and Edward Jones. Dow Jones & Company Dow, Jones and Charles Bergstresser founded Dow Jones & Company in 1882. That company eventually became a subsidiary of News Corp, and ...
Indexes in
New York City New York, often called New York City or NYC, is the List of United States cities by population, most populous city in the United States. With a 2020 population of 8,804,190 distributed over , New York City is also the L ...
and RHB Securities in
Kuala Lumpur , anthem = ''Maju dan Sejahtera'' , image_map = , map_caption = , pushpin_map = Malaysia#Southeast Asia#Asia , pushpin_map_caption = , coordinates = , sub ...
teamed up to launch a new "Islamic
Malaysia Malaysia ( ; ) is a country in Southeast Asia. The federal constitutional monarchy consists of thirteen states and three federal territories, separated by the South China Sea into two regions: Peninsular Malaysia and Borneo's East Malay ...
Index"—a collection of 45 stocks representing Malaysian companies that comply with a variety of Sharia-based requirements. For example, total debt, cash plus interest-bearing securities and
accounts receivable Accounts receivable, abbreviated as AR or A/R, are legally enforceable claims for payment held by a business for goods supplied or services rendered that customers have ordered but not paid for. These are generally in the form of invoices raised b ...
s must each be less than 33% of the trailing 12-month average capitalization. Also, "gambling" on derivatives and options, and on investing in firms that make pornography or pork are also unacceptable. Islamic bonds, or
sukuk Sukuk ( ar, صكوك, ṣukūk; plural of ar, صك, ṣakk, legal instrument, deed, cheque, links=no) is the Arabic name for financial certificates, also commonly referred to as " sharia compliant" bonds. Sukuk are defined by the AAOIFI (Acco ...
, use asset returns to pay investors to comply with the religion's ban on interest and are currently traded privately on the
over-the-counter Over-the-counter (OTC) drugs are medicines sold directly to a consumer without a requirement for a prescription from a healthcare professional, as opposed to prescription drugs, which may be supplied only to consumers possessing a valid presc ...
market. In late December 2009
Bursa Malaysia Bursa Malaysia is the stock exchange of Malaysia. It is one of the largest bourses in ASEAN. It is based in Kuala Lumpur and was previously known as the Kuala Lumpur Stock Exchange (KLSE). It provides a full integration of transactions, off ...
announced it was considering enabling individuals to trade Shariah-compliant debt on its exchange as part of a plan to attract new investors.


See also

* Dow Jones Islamic Fund * Dow Jones Islamic Index ; Banks *
Islamic Development Bank The Islamic Development Bank ( ar, البنك الإسلامي للتنمية, abbreviated as IsDB) is a multilateral development finance institution that is focused on Islamic finance for infrastructure development and located in Jeddah, Saudi ...
* Bank Islam Malaysia * Bank Muamalat Malaysia *
Dubai Islamic Bank The Dubai Islamic Bank (DIB) is an Islamic bank in Dubai, established in 1975 by Haj Saeed Bin Ahmed Al Lootah. It is the first Islamic bank in the world to have incorporated the principles of Islam in all its practices and is the largest Islamic ...
* Islamic Bank of Britain * Meezan Bank Limited ; Non-Bank Finance Institutions * Guidance Residential


References


Sources

* * * * * * * * * * * * *


Further reading

* *
Kuran, Timur. 2018. "Islam and Economic Performance: Historical and Contemporary Links." Journal of Economic Literature, 56(4):1292-1359.
* Waleed Addas (2008)
Methodology of Economics: Secular versus Islamic
*
Iqtisaduna ''Our Economy'' (, ) is a major work in Arabic on Islamic economics by prominent Shia cleric Muhammad Baqir al-Sadr. Muhammad Baqir Al-Sadr was born on Kadhimiyeh, Baghdad in 1935. The book was written between 1960 and 1961, and published in 1 ...


External links


Article on Islamic Economy
{{Islam topics, state=collapsed Islamic economics Islamic economic jurisprudence