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Allocate
Resources To Fulfill Needs
The
Islamic government is responsible for the flow of resources into the
production process and then for the distribution of those goods and
services in order to fulfill needs. Needs refer to the three
categories-daruriyat, hajiyat, or tahsiniyat-that were discussed
above. The government should discourage the production, importation
and distribution of goods and services that do not relate to the
fulfillment of needs. In addition, the government should adjust its
tax structure so that the lowest taxes are levied on daruriyat
goods, higher taxes are levied on hajiyat goods, and the highest
taxes are levied on tahsiniyat goods. It will be necessary to
liberalize the resources tied up in the production of luxury and
status goods. Of course, this cannot be done by mere legal action.
The government will need to strengthen the moral and spiritual
dimension of its people. The government will need to launch a
campaign that encourages simple living and demonstrates, through the
lives of its leaders, its willingness to live according to the
social and cultural values of Islam.
Financial
Restructuring
Islam
prohibits interest on all types of loans. Once interest is banned,
Islamic government has to undertake a complete restructuring of the
financial sector. Here is not the place to discuss the alternative
basis for the banking industry; however, suffice it to say that the
Islamic government needs to take the following steps in this
direction:
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Create a mechanism that enables those households that can use
capital productively to get it on an interest-free basis. This will
save lost household productivity. Presently, no economy is measuring
this loss.
-
Promulgate the suitable legal framework for the prohibition of
interest on all financial transactions.
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Provide the legal basis for the creation of an alternative system of
banking and credit.
-
Ensure the prohibition of interest through appropriate legal and
institutional treasures.
-
Demonstrate its will to abolish interest by organizing its own
transactions, internal as well as external, on an interest-free
basis.
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Convert all existing debts into appropriate interest-free debts.
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Create the framework that will facilitate the conversion of all
outstanding debts in the private sector into interest-free debts.
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Empower the courts and the department of hisba, or any alternative
department with similar functions, to intervene in any transactions
in which interest is suspected.
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Create a standing commission with suitable authority, composed of
economists, ulama, and financiers, that interprets and postulates
standards for the interest-free financial system.
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Provide support and assistance to other economies in creating an
interest-free system in their respective economies.
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Launch a campaign to popularize Islamic modes of finance and educate
the people about the disadvantages of interest-based finance.
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Invite all of its worldwide trading partners to deal with it on an
interest-free basis. Creating a Share in the National Wealth
Creating
a Share in the National Wealth
The
Islamic government should try to create a share in the national
wealth of the country. For those countries that can afford to levy
taxes and create a surplus budget, it is simple. For others, it is
possible through the sale of minerals, the leasing of arable public
land, or the sale of some fixed assets. The funds thus created
should be invested through the stock exchange in the private sector
on the basis of any permissible mode of finance. The government
should try to generate income through dividends, rents, or the sale
of minerals. This income can then be used to even out existing
income inequalities by making transfer payments in favor of the poor
and the weak. The distinct feature of this proposal is that the
government does not manage its own wealth. It only intermingles its
resources with the savings and wealth of the private sector. Since
the private sector has a stake, it strives hard to generate more
wealth. The government takes a share in the profit or loss. This
idea is based on the policy of Caliph `Umar, who allowed the
conquered lands to remain with the existing tillers of the land but
made them share the output with the government. It is inverted
nationalization. In nationalization, the government promises to pay
compensation to the owners; thus, it creates a liability for itself
and also undertakes to manage the nationalized units. In this case,
the government creates an asset, receives a share in the output and
productivity, and is not responsible for asset management. Thus, it
can overcome all the criticism leveled at nationalization.
What
If the Government Fails?
So
far we have been talking only about market failure. The government
should intervene if the market fails, but what if the government
fails to keep the maslahah of the society in view? There is a
possibility that though the government intervenes in the economy, it
acts suboptimally so that the maslahah of the general public is not
served. Thus, we acknowledge the possibility that the regulators may
need regulation.
Need
for an Ethically Motivated Civil Service
The
Islamic government must create an ethically motivated civil service.
A change in recruitment procedures and civil servant selection
criteria is required. Training of civil servants at all levels
should include a high content of ethics based on the precepts of the
Shari`ah. Civil servants should be paid well so that they are able
to lead honorable lives. This will help reduce corruption and the
misuse of public resources by civil servants. It will also cut down
the cost of monitoring their conduct. Even from a purely
materialistic standpoint, it is desirable to have a culture of
honesty. Islamic society's primary concern is to create an
environment in which public servants are motivated by their desire
to serve people for the sake of God. In such a society the relevant
question is not, What is the role of ethical norms in the economy?
but rather, What are the roles of market and government in a society
that is based on ethics, trust, and cooperation?
Transparency
and Accountability
Transparency
is a key concept of public administration. The government has a
moral and sometimes a legal responsibility to publicly disclose its
performance. For this purpose government business should be
transparent. Although the concept of transparency in public
administration has become popular only recently, we find its roots
in early Islamic history. The most prominent example is Caliph `Umar’s
insistence that all provincial governors and other senior civil
servants lead an open life in which their decisions are made
available for public scrutiny. He took severe action against those
who were found guilty of misconduct. The early caliphs of Islam led
transparent lives. They offered themselves for open scrutiny. They
also held their officers accountable. In this age, to safeguard the
public against the deception and arbitrary decisions of government
officials, the following policy suggestions are relevant:
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The wealth and assets of government officials holding key positions
should be made transparent.
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The decision-making process carried out by important government
functionaries should be made transparent, thus leading to a
reduction in the domain of the secrecy laws.
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Public servants should not be allowed to acquire public property
when a conflict of interest may be involved. For example, government
servants responsible for the privatization of public enterprises
should not be allowed to purchase the assets of those corporations
in their own name or in the names of their family members.
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Discretionary powers of the bureaucracy will have to be reduced to a
minimum.
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The public should have the right to complain against the behavior of
government servants and also the right to receive a reply to their
complaints. Therefore, every government department should have a
complaint-handling mechanism in place.
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Government accountability must be institutionalized. The supreme
audit institutions of the country should be made more independent
and strengthened.
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In the final analysis, nothing can restrain the bureaucracy from
misusing and abusing public resources except a civil society that
acts as a moral conscience and a countervailing force.
Regulating
Rent Seeking
In an Islamic society, government policies that create privileged
groups are undesirable. This is obvious from the following example.
The Prophet took back land from his companion Abyad b. Hammal when
he came to know that it contained a salt mine and its private
ownership might cause hardship to the general public. Similarly, we
find that the Prophet donated land to some of his companions with
the hope that they would develop it. Later, when it was learned that
the donee did not develop the land, it was taken back from him. From
these examples, we can derive some general principles. First, the
Islamic concept of rights accompanies obligations. There are no
rights that do not entail obligations. Therefore, the government
should not create any right that does not specify the obligations of
the beneficiaries.
Second,
to protect the interest of the general public, government donations
should not be for the purpose of creating monopolies. Third,
donations should not allow some individuals to reap vast profits
without the investment of labor or capital. In the example above,
the salt mine on the land given to Abyad b. Hammal was on the
surface and would not have required any development effort to
extract salt from it. Fourth, in an Islamic society, the discretion
to donate property to individuals does not lie with any person even
though he is the head of state. It is to be decided by the society
collectively on the principle of Shura (consultation).(18)
The rights of the government and its leaders, including the
president or prime minister, are the same as an ordinary citizen. As
part of the government, government officials are only trustees of
public resources.(19)
Fifth, the state may create some rents where the creation of these
rents is an incentive for a higher social objective like
industrialization or technology development. Rent seeking becomes
objectionable when the vast profits generated in this process are
not deployed productively.(20)
Sixth, despite the above-mentioned training, people will still tend
to seek benefits from the government. The government must enforce a
code of conduct on public servants, politicians, and businessmen,
restraining them from seeking to influence the government for any
such benefits.
Should
we say there will be no special interest groups in today's Islamic
society? It would be overly simplistic to make such a presumption.
There will remain special interest groups in society. However, it is
not necessary that these groups act against social interests in each
case. In some cases, they may play a positive role by providing
information on specific problems. In the absence of these groups,
perhaps, the onus on the government is too large. It will need to
know everything about everyone before taking a decision. This is
obviously too much to expect from the government of fallible human
beings. These interest groups could play a positive role. The
government should accommodate them on the basis of the general
principle of maslahah. Of course, some groups will be able to obtain
certain benefits, while others will lag behind. In an imperfect
world there is no possibility of arriving at ideal solutions. The
point is that the government should explicitly take maslahah into
account and should not be merely guided by special interest groups.
To what extent this general direction of public policy will be
different from a capitalist society depends to a large extent on the
conscience of the society, responsiveness of the government to the
maslahah, the competence of the government to take proper decisions,
and the quality of information on which decisions are made.
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