Moral Economy in Islamic Finance

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Table of Contents

What is a Moral Economy in the Context of Revolutions and Protest Movements?
What are the Characteristics of a Smoothly Functioning Moral Economy?
What Goals are the Common in a Moral Economy?
Moral Economy Comes from the People, and Does Islamic Finance Enable it?
Works Cited

What is a Moral Economy in the Context of Revolutions and Protest Movements?

Adeel Malik and Bassem Awadallah’s opening statement speaks volumes about the core value of the quest for a moral economy, and they said: “The real struggle for change in the Arab world will only begin when the dust from its youth revolutions has finally settled down” (2). In other words, the quest for a moral economy does not begin and end with a successful ouster of a dictator or the installation of a new form of government.

The authors issued a warning that the euphoria emanating from the recently concluded Arab spring movement may end up in frustration and suffers the same fate as other revolutionary movements in the past. Consider for example the unfortunate story of oppression and economic stagnation in Cuba. Before Fidel Castro became the poster boy for coup attempts that ended up in another dictatorial rule, Castro was the leader of a revolutionary movement that was created to destroy the status quo. Nevertheless, after dismantling the old regime, Castro’s reign was not much different from that of his predecessors.

The same thing can be said about the struggle for independence in African countries in decades past. At the turn of the 20^th-century African nations yearned for their independence and desired to break away from the shackles of Western colonizers. Nonetheless, when the cheers of the crowd died down and nation-building started, many were aghast to discover that the white oppressors were replaced by black oppressors.

The ethnic backgrounds of the leaders transformed, but the problems remained the same. Going back to Arab spring’s ground zero, Egyptian youth succeeded in ousting Hosni Mubarak, but they were dismayed to discover that Egypt’s former dictator was simply the manifestation of the problem. At this point, it was made clear to them that corruption was rooted in the military’s stranglehold on the economy. Egypt’s military leaders “control vast economic resources, from manufacturing to real estate and services, and it’s budget envoys immunity from parliamentary scrutiny, and the military’s role as a regional peacemaker further entrenches its power” (Malik and Awadallah 2).

Therefore, one can argue that when revolutionary leaders and protesters initiate calls for change, they wanted more than a change in leadership. They want to experience what experts call a moral economy in contrast to the market-driven economy that characterizes the modern world. A moral economy contains the common characteristics in an ideal world wherein the members of the community are not contending with the effect of inequality and barriers to economic growth. A moral economy goes beyond the desire for freedom and human rights, those who go after it are thinking about a more humane approach in providing opportunities for social mobility and access to government services.

One of the best manifestations of a moral economy is the use of microcredit so that poor families can access capital to start a business or expand a current business venture. In a conventional market economy, borrowers coming from the low-end of the social ladder are considered risky investments. Thus, the high barriers erected to prevent them from borrowing money to kick start their business fuels the cycle of poverty and inequality, so that the rich become richer and the poor slide down even lower into the bottom part of the social pyramid (Fontaine 4).

What are the Characteristics of a Smoothly Functioning Moral Economy?

Before going any further it is important to figure out the theoretical underpinnings of the “moral economy” concept. This particular idea was extensively developed by E.P. Thompson in his work entitled The Making of the English Working Class that was published in 1961 (Little 1). Thompson elaborated it in an essay entitled The Moral Economy of the English Crowd in the Eighteenth Century (Little 1). Thompson coined the term moral economy after he studied the bread riots in 18^th century Britain (Little 1).

In his research, he discovered that when poor peasants and poor workers instigate a food riot that ended in the looting of barns, grain warehouses, and shops, their actions were inspired by the assumptions rooted in an older moral economy (Little 1).

According to Karl Polanyi, a careful study of human history will reveal that the current conception of a global or national economy is a modern philosophical concept. He was probably referring to an economic world view developed by Adam Smith and supported by European economic powers in the modern age. In Smith’s laissez-faire approach, free markets control the lives of people. For example, famines in Africa and India were exacerbated by the impact of economic forces so that the exorbitant prices of food products were the result of the push and pull of supply and demand requirements.

Thus, affluent countries in Europe drove prices up when they desperately needed the resources grown in colonies like India and Africa. The resulting price increase made it impossible for poor farmers and low-wage earners to buy food resources that were cultivated in their province. The steep increase in prices was also caused by speculators hoarding food products in anticipation of drought or low supply scenarios (Davis 50).

Polanyi argued that in the past “no economy has ever existed that, even in principle, was controlled by markets” (Biggart 38). Polanyi draws heavily from Thompson, and he pointed out that the concept of the moral economy came from the idea that “peasant communities share a set of normative attitudes concerning the social relations and social behavior that surround the local economy: the availability of food, the prices of subsistence commodities, the proper administration of taxation, and the operation of charity” (Little 1). Based on insights gleaned from Thompson and Polanyi’s writings, one can make the argument that to sustain a smoothly functioning economy, stakeholders must always consider the poor people’s access to subsistence commodities.

What Goals are the Common in a Moral Economy?

The Arab spring revolutionary movements that transformed the political structures of the Middle East, these share common denominators with the bread riots of 18^th century Britain and other protest movements in different parts of the globe. In these events, one can see shared common goals, and these are the need to eliminate barriers so that poor families have access to subsistence commodities and the need to develop a mechanism that will allow people to acquire jobs and commodities without the use of a coercive central government.

At first glance, it seems as if the wave of government protests that characterized the Arab Spring that swept across the Middle East in 2011 has nothing in common with the bread riots that occurred in England and the colonies under the protection of Great Britain.

However, a closer examination of the details reveals common goals. For example, the lack of job opportunities in Egypt before the Arab spring revolt intensified growing anxiety within Egyptian societies, because the citizens were afraid that they have no means to acquire the necessities like food, clothing, and shelter due to the oppressive economic conditions. In the bread riots, a strong central government was able to impose strict laws, but it failed to see the needs of ordinary citizens.

Therefore, the laws that were created to foster peace and order are the same laws that stifle the distribution of goods and services. For example, in the famines that devastated India in the late 19^th century, there was a high unemployment rate that made it impossible for poor families to buy food. It was a frustrating development because in the past they were able to acquire the same basic commodities (Davis 53). Also, hoarders were able to corner the commodities in anticipation of food shortages, thereby exacerbating the problems created by widespread famines. In this scenario, one can see how Thompson and Polanyi’s ideas were played out in a real-life setting.

The people no longer had control over their lives. In the same manner, Egypt’s youth were unable to find decent jobs and other sources of income, because of an economic system that was controlled by the elite members of society. Common goals are characterized by the need to obliterate over-dependence on central power and to eliminate the barriers to subsistence commodities.

Moral Economy Comes from the People, and Does Islamic Finance Enable it?

One can argue that the establishment of a moral economy must come from the initiative of ordinary individuals. The participation of a central government lessens the impact of a moral economy because its essence is dependent on the community level interaction between different players. They are stakeholders willing to work together to remove the obstacles and other impediments that make it difficult to establish a practical system of wealth distribution.

As mentioned earlier, one of the best manifestations of a moral economy is the presence of a micro-financing or micro-credit in impoverished areas of the nation. Poor people are not lazy; they simply do not have the opportunities that enable them to create wealth or products and services that they can use to exchange for basic commodities.

It is interesting to note that Islam, the religion of the Muslim people adheres to a certain legal framework that encourages the establishment of a moral economy. Without a doubt, Islam’s sacred scriptures did not provide a detailed discussion of the principles of a moral economy. However, the ideas that one can glean from studying the Quran and the Hadith literature leads to the conclusion that Islam desires the equitable distribution of wealth and the creation of systematic social structures “that provide universal care for all individuals” (Karim 1).

The Muslim world is not only exposed to the ideas of charity, but the need to share resources to poor members of society is also a legal mandate expressed through a social framework and religious practice called the zakat. At the same time, Muslims receive the commandments from the Quran to care for orphans, widows, poor people, and those who are in debt (Karim 1).

The attempt to redistribute wealth through the use of a religious framework can help establish a moral economy. However, it is also important to look back at the successful models in micro-financing to see the potential problems when it comes to making attempts in creating a social order based on the concepts of a moral economy. In micro-financing, the people involved went beyond the idea of dole-outs and giving alms to the poor.

Poor families accustomed to the delivery of relief goods and dole-outs are not going to develop the necessary skills that will enable them to participate in the said moral economy. Therefore, the key consideration is the ability of the members of society to participate in the redistribution of wealth using sustainable practices. If one will give cash to the poor, they will only consume the said resource until it runs out. As a result, they will become dependent on others.

In this scenario, there is not much difference between a society dependent on the assistance of a central government and a society dependent on dole-outs and handouts from private citizens or non-government agencies. Therefore, it is important to work with others, because a truly moral economy is something that comes out from a collaborative engagement with members of society and not from the programs that emanated from a central government. It is important to empower people. At the same time, it is imperative to develop strategies that will enable poor families to break away from their over-dependence on government assistance.

Works Cited

Biggart, Nicole. Readings in Economic Sociology. Malden, MA: 2002. Print.

Davis, Mike. Late Victorian Holocausts: El Nino Famines and the Making of the Third World. Brooklyn, NY: Verso Press, 2001. Print.

Fontaine, Lauren. The Moral Economy. New York, NY: Cambridge University Press, 2014. Print.

Karim, Shafied. The Islamic Moral Economy. Boca Raton, FL: Brown Walker Press, 2010. Print.

Little, John. Moral Economy as a Historical Social Concept. 2008. Web.

Malik, Adeel, and Bassem Awadallah. The Economics of the Arab Spring. Oxford, UK: Oxford University Press, 2011. Print.

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