[Islam-Online- Economy]

We need government to provide the fundamental legal and social framework for a free market economy. This framework implies necessary laws that define the property and other rights, enforce contracts, and describe the status and form of various business organizations. We need government to define the rules of the game. Through legislation the government acts as a referee and forbids foul play. It prohibits cheating and the sale of adulterated foods and drugs; it establishes quality standards and defines the qualifications of those providing professional services such as lawyers and doctors. We need government to create conditions that ensure free competition. In the absence of a central agency with necessary coercive powers, private markets tend to operate in an indifferent and sometimes cruel manner. Business firms like to collude, if they can, in their self-interest and against the interest of the consumers, the poor, and the weak. Also, the reverse may happen. If the number of buyers is small and the sellers are many, the buyers may collude to coerce the sellers. Neither situation is desirable. Implications of Government Intervention.
Government intervention in the economy has far-reaching consequences. Before the government decides to intervene, it must understand what it will mean to different actors in the economy. In a free market economy, buyers and sellers interact. When a consumer goes to the market to buy something, he expresses his desire through his purchasing power. The desire to buy one thing rather than another means that the consumer is carrying a basket of exercisable options. These options are in preference to an infinite number of other combinations of goods that he can buy. The options expressed through his purchasing power represent a given pattern of income and wealth distribution in the society. This brings with it the prevalent set of property rights and institutions. When the government intervenes in the market by levying a tax, regulating a business, imposing restrictions on production or consumption, transferring income or goods to certain groups or persons, or granting rights to property, the government is effectively manipulating property rights. These property rights affect income distribution and through them the basket of options that each individual carries to the market. It is a complex situation, and government decisions to intervene or not to intervene, to regulate or not to regulate, have far-reaching effects. They affect the power relationships in the society. The issue of government intervention boils down to the redistribution of individual rights. The moot question in each situation is whose rights, whose welfare, whose ends, and whose wants the government is going to gratify? Whenever the government intervenes, it restricts one person's liberty to give liberty to someone else. How a government acts or fails to act depends upon the overall social framework. The free market capitalist economy, for example, answers the question according to the political or other pressures of the special interest groups. In an Islamic society, ideally, the answer to the question comes from the theory of maslahah.
Theory of Maslahah
Maslahah literally means "utility" or "welfare." The jurists use it to denote public interest or general human good. The first important case in Islamic history using maslahah as a basis of public policy was the decision of Caliph 'Umar for the land management of southern Iraq. 'Umar decided, on the basis of public interest, not to distribute the conquered lands of southern Iraq among the soldiers of the Muslim army. He argued that if he did so it would create a class of feudal lords who would own large tracts of land resulting in the coming generations getting nothing. Therefore, he decided that the conquered lands would be made the property of the entire Muslim ummah and that the existing owners would cultivate these lands as before but would pay a tax known as kharaj. This decision became a precedent for later jurists to invoke public interest as a basis for public policies.
The concept of maslahah remained in its rudimentary form in the writings of early jurists until Abu Hamid al-Ghazali (d. 505 a.h./1111 a.d.) developed it into a mature concept. Al-Ghazali stated, and this has been unanimously agreement upon since his time, that the ultimate purpose of the shari'ah is to further the maslahah of the ummah. The concept of maslahah was developed further by Abu Ishaq al-Shatibi (d. 790 a.h./1388 a.d.).1 Both Ghazali and Shatibi divide the masalih (plural of maslahah) into the following three categories: essential (daruriyah), complementary (hajiyah), and desirable (tahsiniyah). The essentials refer to those masalih that protect religion (din), life (nafs), offspring (nasl), reason ('aql), and property (mal). The government's primary duty is to safeguard these at any cost. The complementary and desirable masalih tend to vary according to social and economic conditions. The government protects them only when it has fulfilled its primary duty of protecting the essential interests. In the case of a trade off, the three categories of interests will be fulfilled in their hierarchical order. Generally, the jurists have agreed that the government should strive to protect the three categories of maslahah because they entail human needs. Anything beyond them is extravagance or prodigality.2 These categories are interconnected and complementary and, therefore, should be protected. For the maslahah of the hereafter we must take into account the masalih of this world.3
Shatibi discussed the question of when one's maslahah is harmful to others. Striving for maslahah, even when it may cause harm to some individuals, is allowed if the number of beneficiaries is more than those who suffer harm.4 There is no need to search for an absolute maslahah. Seeking self-benefit is forbidden only when the harm to others is actual and not just potential.5 The ultimate criterion of maslahah is that is provides good to a larger number of people than it harms.6 There is a possibility that a shari'ah-oriented policy results in some form of collective harm. In such a situation the policy will be discarded in favor of a policy that is more beneficial to the society since the ultimate goal of the shari'ah is to be beneficial to the society.7
Creating an Islamic Society
All civilized societies have some built-in system of indoctrination to ensure that people behave in a socially acceptable manner.8 The Islamic society is no exception to this. The Islamic government cannot remain passive to the ethical conditions of the people since, to a large extent, it depends on the voluntary ethical behavior of its people. The Qur'an obliges the Islamic state to enforce proper behavior and to restrain people from improper behavior. An Islamic society is responsible for creating institutions that inculcate each citizen with Islamic norms. People should learn to sacrifice their short-term personal interests for the greater good of the society. The belief in the hereafter should be embedded in the minds of all so that everyone abides by the rules of social conduct. Society should also create a system of threats for those who try to violate the norms. Only in this way can the Islamic society perpetuate itself and be safe from external onslaught. Regulatory Role of the Islamic State
The Institution of al-Hisba
We can take inspiration for the regulatory role of the government from an Islamic institution known as al-hisba. When the Islamic civilization was at its height, it regulated the market. Al-hisba was a state institution in all Muslim societies up to the colonial period. It had three functions. First, it enforced proper ethical behavior and restrained people from improper and unethical behavior. Second, it was responsible for providing some municipal services such as street lighting and street cleaning, preventing encroachments, and protecting the environment. Third, it regulated markets by checking weights and measures, enforced contracts, forced payment of debts by defaulters, and prohibited unlawful trade practices.
With the advent of Western colonialism, al-hisba, like most Muslim institutions underwent drastic modifications and decline: It either disintegrated into a number of departments or remained an ineffective appendage of the state. By the 19th century, Persia, Turkey, Egypt, and India had already transformed the hisba function into a number of secular departments, discarding its religious content as irrelevant. The hisba department effectively regulated markets in Muslim lands. It performed several of the functions that a modern regulatory agency performs. For example, the hisba ensured that resources flowed into the production of undesirable goods or services. The muhtasib (the head of the hisba department) kept a strict watch on the supply position of the essential commodities so that the public did not face hardship. The muhtasib guarded free competition and took action against business persons who tried to collude against the public. He would not seek to control prices unless they were being artificially inflated by traders. He ensured free entry into and exit from the market.
In this age, the role of government and its interface with the market has increased and become more complex. Instead of the hisba, the democratic state has several regulatory agencies. The Islamic hisba, which generally only regulated the markets, has been replaced by institutions that regulate the government as well; therefore, in this age any implementation of the hisba department through imitation is decidedly misguided. In addition, the old institution of al-hisba indicates that the Islamic state should not be oblivious to the moral conduct of its citizens; after all, marketplaces and government offices also require ethical behavior in the absence of which civilized living is not possible. Then what is the harm if some agency oversees this aspect of individual and organizational behavior? We shall have to make sure that such a regulatory body does not become a monster itself. A system of checks and balances are needed to implement this idea.