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Islamocapitalism? By: Mustafa Akyol
TCSDaily.com | Tuesday, June 20, 2006

Is Islam compatible with modernity? This has become a hotly debated question in the past few decades. Much of the discussion focuses on issues relating to political liberalism -- democracy, pluralism and freedom of thought. Another important dimension of modernity is, of course, economic liberalism. So we should also ask whether Islam is compatible with it, i.e. a free market economy, or, capitalism.

Most Islamists would reply to this question with a resounding "no!" Since they perceive Islam as an all-encompassing socio-political system, they regard capitalism as a rival and an enemy. The struggle against both communism and capitalism has been one of the standard themes in Islamist literature. Sayyid Qutb, the prominent ideologue of the Egyptian Muslim Brotherhood, wrote a book titled Ma'arakat al-Islam wa'l-Ra's Maliyya (The Battle Between Islam and Capitalism) in 1951. At an Islamic conference held in the Spanish city of Granada on July 2003, attended by about 2,000 Muslims, a call was made to "bring about the end of the capitalist system."

However such radical rejections of the capitalist economy don't seem well-suited to the theological attitude and the historical experience of Islam towards business and profit-making. As a religion founded by a businessman -- Prophet Muhammad was a successful merchant for the greater part of his life -- and one that has cherished trade from its very beginning, Islam can in fact be very compatible with a capitalist economy supplemented by a set of moral values that emphasize the care for the poor and the needy.

Business, Zakat and the Koran

This interesting compatibility between Islam and capitalism has been studied extensively. A classic work on this theme is Maxime Rodinson's famed book, Islam and Capitalism (1966). Rodinson, a French Marxist, by appealing to the textual analysis of Islamic sources and the economic history of the Islamic world, demonstrated that Muslims had never had any trouble with making money. "There are religions whose sacred texts discourage economic activity in general," said Rodinson, "[but] this is certainly not the case with the Koran, which looks with favor upon commercial activity, confining itself to condemning fraudulent practices and requiring abstention from trade during certain religious festivals."

It is true that the Koran has a strong emphasis on social justice and this has led some modern Muslim intellectuals to sympathize with socialism and its promise of a "classless society." A careful reading of the Koran would work against such "Islamo-socialism." The Muslim Scripture takes it as a given that there will be rich and poor people in society and, in a sense, assures that disparity by actively supporting the rights to private property and inheritance. However it persistently warns the well-off to care for the deprived. Zakat is the institutionalized form of this compassion: Every rich Muslim is obliged to give a certain amount of his wealth to his poor brethren.

Zakat is a voluntary act of charity, not a collectivization of wealth by a central authority. According to scholars John Thomas Cummings, Hossein Askari and Ahmad Mustafa -- who co-authored the academic paper, "Islam and Modern Economic Change" -- "zakat is primarily a voluntary act of piety and a far cry from what most modern-day taxpayers experience when confronted with increased income levies or complicated regulations." Moreover, they add, "there is no particular Islamic preference for [a] Marxist emphasis on economic planning over market forces."

Indeed, when Prophet Muhammad was asked to fix the prices in the market because some merchants were selling goods too dearly, he refused and said, "only Allah governs the market." It wouldn't be far-fetched to see a parallel here with Adam Smith's "invisible hand." The Prophet also has many sayings cherishing trade, profit-making, and beauties of life. "Muhammad," as Maxime Rodinson put it simply, "was not a socialist."

The conceptual openness of Islam towards business was one of the important reasons for the splendor of medieval Muslim civilization. The Islamic world was at the heart of global trade routes and Muslim traders took advantage of this quite successfully. They even laid the foundations of some aspects of modern banking: Instead of carrying heavy and easily-stolen gold, medieval Muslim traders used paper checks. This innovation in credit transfer would be emulated and transferred to Europe by the Crusaders, particularly the Knights Templar.

So central was trade to Muslim civilization that its very decline may be attributed to changes in the pattern of global trade. When Vasco de Gama rounded the Cape of Good Hope in November 1497 -- thanks in part to the astrolabe, invented by Muslims -- he opened a new chapter in world history, one in which global trade would shift from the Middle East and the Mediterranean to the oceans. Consequently the Arabic Middle East, which had been scorched by the Mongols two centuries before and could have never recovered anyway, entered deadly stagnation. The Ottoman Empire would excel for a few more centuries, but decline was inevitable. The loss of trade also meant the end of cosmopolitanism; this was followed by the rise of religious bigotry. While the early commentators of the Koran cherished trade and wealth as God's bounties, late Medieval Islamic literature began to emphasize extreme asceticism.

Muslim Calvinists?

If things had not gone wrong, the business-friendly character of Islam could have well put it into the historical place of Calvinism, which, as Max Weber persuasively argued, spearheaded the rise of capitalism. Weber himself wouldn't have agreed with this comment -- he saw Islam as a religion of conquerors and plunderers, not hard-working laborers. According to Weber, Islam was an obstacle to capitalist development because it could foster only aggressive militancy (jihad) or contemplative austerity.

But Weber, in his Confucianism and Taoism (1915), argued that China could never breed a successful economy, because its culture was too nepotistic. He was pretty pessimistic about Japan's potential for economic success, too! His analyses of these non-Christian civilizations failed because he assumed the perpetuity of their forms, and, in part, misread their histories. One of the greatest Turkish sociologists, Sabri F. Ülgener -- both a student and a critic of Weber -- wrote extensively about how he, despite his genius in analyzing the origins of capitalism in the West, misjudged Islam and overlooked its inherent compatibility with a "liberal market system."

Stuck on Usury

However this compatibility is not fully unproblematic. Among the aspects of modern capitalism, there is one particular bone of contention with Islam: interest. "Allah has permitted trade", the Koran commends, "and He has forbidden riba." And riba is generally translated as taking interest from money.

That's why modern Muslims have developed "Islamic banking" as an alternative to interest-based banking. This is, in fact, a transplantation of "venture capital" as it has been developed in the West; aspects of Islamic banking are adaptations of related services like leasing, partnership, mark-up financing and profit-sharing.

While Islamic banking allows capitalism without interest, some Muslims go further and ask whether riba really includes reasonable interest. This liberal interpretation dates to the 16th century in the Ottoman Empire. During the reign of the Suleiman the Magnificent, his Sheik-ul Islam (Head of Islamic Affairs), Ebusuud Effendi, granted permission for the collection of interest by foundations working for the betterment of the society. In modern times, there are many Muslim scholars who have reinterpreted riba. Imad-ad-Dean Ahmad of the Minaret of Freedom Institute, for example, argues that the term actually means any unconscionable overcharging, whether on an interest rate or a spot price. Charging a market rate of interest, he holds, does not constitute riba.

Whether reasonable interest is allowed or not, Islam's theological and historical attitude towards business is undoubtedly positive. "The alleged fundamental opposition of Islam to capitalism," as Maxime Rodinson put it, "is a myth."


If this is so, whence comes "the battle between Islam and capitalism" as envisioned by radical Islamists like Qutb?

The answer lies both in the asceticism of late Medieval Muslim thought, which remains alive today among many ultra-conservative Muslims, and in the un-Islamic origins of Islamic radicalism. The latter was born as an anti-colonialist, reactionary movement; its main aim has been to create a socio-political system to challenge and defeat the West. Since the West was built on democratic capitalism, Islamic radicals argued that its opponents must adopt an alternative political/economic vision. That's why the founding fathers of radical Islam -- such as Qutb and Mawdudi -- borrowed heavily from what Ian Buruma and Avi Margalit call "Occidentalism" -- an ideology with its origins in Heidegger's criticism of the West, adopted by Japanese fascists, the Nazis, the Khmer Rouge and, more recently, Al Qaeda and their ilk.

Yet for those Muslims whose lives revolve not around Occidentalism but around personal religiosity and a natural human desire for the good life, democratic capitalism seems quite well-suited.

Some striking examples of this phenomenon have emerged in Turkey in the past two decades. Turkey is not the richest country the Islamic world, but it is arguably the most developed. The richest are the oil-rich Arab nations, most of which, despite their petro-dollars, remain socially pre-modern and tribal. Regrettably, oil brings wealth, but it does not modernize. Modernization comes through rationality, which can be achieved only through organization, order, exchange, and risk-taking in pursuit of goals. The late Turgut Özal, one of Turkey's wiser Presidents, once said, "we are lucky that we don't have oil; we have to work hard to make money."

Özal was a pro-Western politician and a Muslim believer. His revolutionary, Reaganesque reforms during the 1980s transformed the Turkish economy from quasi-socialism to capitalism. In this new setting the conservative Muslim masses of Anatolia have found fertile ground for a socio-economic boom. Thanks to their astounding successes in business, they have been called "Anatolian Tigers." They constitute a new class that rivals the long-established, privileged, highly secularized and utterly condescending "Istanbul bourgeoisie."

The European Stability Initiative (ESI), a Berlin-based think tank, conducted an extensive study of the "Anatolian tigers" in 2005. ESI researchers interviewed hundreds of conservative businessmen in the central Anatolian city of Kayseri. They discovered that "individualistic, pro-business currents have become prominent within Turkish Islam," and a "quiet Islamic Reformation" was taking place in the hands of Muslim entrepreneurs. The term they used to define these godly capitalists was also the title of their report: "Islamic Calvinists."

The incumbent Justice and Development Party (AKP), seems to be a political echo of this rising "Islamic Calvinism" in Turkey. Most AKP members come from business backgrounds and the party has been quite pro-business from its very first day. Its leader, Prime Minister Erdogan, has repeatedly welcomed foreign direct investment from all countries -- including Israel. Recently, in a speech given at an international Islamic conference, Mr. Erdogan called on Arab leaders to redefine the Islamic ban on interest and warned that Islamic banking could turn into a "trap" that might hinder development in the Muslim world. The more such voices are raised by Muslim leaders, scholars and intellectuals, the freer markets -- and minds -- will become in the broader Middle East.


Still, many Muslims -- in Turkey and elsewhere -- despise capitalism and perceive it as something both alien and destructive to Islam. Yet this is a misdirected disdain. When you look at anti-capitalist rhetoric in Muslim circles, you will see that it is focused on sexual laxity, prostitution, drugs, crime, or the general selfishness in Western societies. Yet these are not the inherent elements of capitalism, they would be better explained by the term "cultural materialism" -- the idea that material things are the only things that matter. Most Muslims who abhor capitalism simply confuse it with materialism.

Such worried Muslims would be quite surprised to discover that some of the most outspoken advocates of the free market in the West are also staunch defenders of religious faith, family values and the healthy role of both in public life. Unfortunately, the synthesis of democratic capitalism with Judeo-Christian values -- which is basically an American, not a European phenomenon -- is not well known in the Islamic world. The America of churches and charities is poorly represented in the global mass media. Quite the contrary, what most Muslims see as standard Americans are the unabashed hedonists of MTV and Hollywood.

In other words, not all capitalists are of the flock of Mammon. The more Muslims realize this, the less they will fear opening their societies to economic development and the more they will remember the Koranic command, "spread through the earth and seek God's bounty and remember God much so that hopefully you will be successful."

Then the world will be a much safer place -- for a morally-guided quest for capital is way more peaceful than a hate-driven "battle" against it.

Mustafa Akyol is a Turkish Muslim writer based in Istanbul, Turkey. His website is www.thewhitepath.com

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