Early Arab-Islamic economic thought

While there has been, until recently, almost uncritical acceptance of the “gap” thesis, there is an exception to be noted. Joseph Spengler wrote a paper about 50 years ago, in which he explored the economic thought of a late-medieval, “post-blank centuries” Arab-Islamic scholar, Ibn Khaldun (1332—1406).

Be that as it may, by and large, the general tendency has remained one of a complete lacuna over intellectual evolution elsewhere during those centuries. Illustratively, one prominent text on the subject noted “it is inconceivable that there was no ‘economic thought' over so many centuries — even in the Dark Ages” (Newman, et al., 15): yet no attempt to explore further.

As the main task, while 30—5 Arab-Islamic scholars can be identified writing on economic issues during the “blank” centuries, this chapter will focus on four such early medieval scholars (M.N. Siddiqui, 1981). These are: (1) Abu Yusuf (731-98); (2) Alberuni (973-1048); (3) Al-Ghazali (1058-1111); and (4) Nasir al-Din Tusi (1201-74). It may be noted that these scholars wrote within many diverse fields of knowledge, and their writings, as those of their European-Latin counterparts, emphasized the integrative, holistic approach to learning.

Abu Yusuf (ad 731-98)

While there were other Arab-Islamic scholars and jurists who wrote on economic issues almost from the inception of Islam, one of the earliest is Abu Yusuf. He lived during Baghdad's Abbasid Caliphate of Harun al-Rashid (763-806) and served as his chief justice. He addressed a long narrative to the Caliph, later to become known as Kitab al Kharaj (The Book of Taxation). Relevant to economics, his main interests were public finance and taxation, distribution and cultivation of land, regulation of prices, economic responsibilities of the state, and usurious transactions. Abu Yusuf's works have been studied by several writers (Tuma, Fariq, M.N. Siddiqui, B. Siddiqi, and Haq).

While discussing agricultural activities, Abu Yusuf favored a proportional tax on agricultural produce, rather than a fixed rent on land. This, he thought, would not only be just, but also conducive to larger revenue by providing incentives to bring more land into cultivation. He also offered insights concerning the administration of agriculture in new territories, agricultural estates, their cultivation and distribution, tenancy conditions, problems relating to water supply, fisheries, forests and pasture lands, and general public works (such as roads and bridges, and canals for irrigation and transportation).

A controversial point in Abu Yusuf's economics relates to price controls. He was generally against price-fixing or price controls on the part of rulers, but he distinguished between condi­tions when such controls may or may not be permissible.

The main strength of Abu Yusuf, however, lies in the area of public finance. Aside from the principles of taxation and the responsibilities of the state concerning the welfare of the society, he provided discussion on promoting economic development, especially in agriculture, by build­ing socio-economic infrastructure. Further, guided by his deep concern for the common good, he exhorted the rulers to work toward eliminating oppression and promoting social justice (Fariq, 24). In discussing taxation, Abu Yusuf also delineated certain principles which anticipate those proposed several centuries later by Adam Smith as the “four canons of taxation” (equity, certainty, convenience, and economy). He talked of easing the burden on taxpayers by taking into account their ability to pay, and convenience regarding time, place and manner of payment. He also discussed the distribution of tax revenue and various types of taxes such as taxation of agricultural land and commodities, death duties, and taxes on imports. He favored centralized tax adminis­tration, with strictly supervised salaried tax collectors, so that corruption is prevented (see Siddiqui and Ghazanfar, 2001).

Abu Al-Raihan M. Ibn Ahmed Alberuni (973-1048)

Alberuni was “one of the greatest scholars of medieval Islam, and certainly the most original and profound” (Spengler, 1971a, 93), and “one of the very greatest scientists of Islam and, all considered, one of the greatest of all times” (Sarton, vol.I, 407). Like several other Arab-Islamic scholars (e.g. Ibn Mishkawail, Ibn Sina, Fakhr al-Din Razi, Nasir al-Din Tusi), Alberuni was born in Persia (Iran); all of them, however, are generally identified with Islamic civilization, and Arabic was the primary language of their discourses.

Two of Alberuni's most famous works, both edited and translated by Edward C. Sachau, are Alberuni’s India (2 volumes, 1887), and Chronology of Ancient Nations (1879). More relevant to our topic is Alberuni’s India. Two major, interrelated themes are identifiable here, and both have significant implications for economics. One pertains to the concept of “Social Darwinism,” with its self-interest, unbridled market implications; and the other, perhaps more important, relates to the “population-food” dilemma, usually associated with the name of Thomas Malthus (1766-1834).

Writing in 1943, a Russian scholar, T.I. Rainow, argued that one may find the “whole theory of Darwinism already expounded more than eight hundred years before the publication of the theory of natural selection.” Rainow is quite emphatic:

Thus, in modern language we could express this thought of Alberuni as follows: Nature performs natural selection of the most adequate, well-adapted being through the extermination of others, and, in this case, it proceeds in the same way as farmers and gardeners. We see, therefore, that Darwin's great idea of natural selection through the struggle for life and survival of the fittest was already reached by Alberuni approximately eight hundred years before Darwin. It is true that he seized it in the most general outlines only, but, curiously enough, even the very meaning and the way in which he came to it were the same as Darwin's.

(quoted in Wilczynski, 459)

Several arguments in Alberuni's writings, according to Rainow, pre-echo the “theory of evo­lution,” “natural selection,” and “survival of the fittest” themes of Charles Darwin (1809—1882) — concepts which “influenced some, but by no means all, of the streams and schools of economic thought” (Oser, 373).

Alberuni talked in terms of “selectivity” and “evolution” with respect to plants, animals, and human beings. According to Wilczynski, similarities with Darwin's idea are detected in the following paragraphs:

When a class of plants or animals does not increase any more in its structure, and its peculiar kind is established as a species of its own, when each individual of it does not simply come into existence once and perish, but besides procreates a being like itself or several together, and not only once but several times... Nature proceeds in a similar way; however, it does not distinguish, for its action is under all circumstances one and the same. It allows the leaves and fruit of the trees to perish, thus preventing them from realizing that result which they are intended to produce in the economy of the nature. It removes them so as to make room for others.

(Alberuni, vol.I, 400)

Thus, Alberuni suggested that the pressure of increasing numbers would give rise to natural selection, though not to selection so favorable as that conducted under human guidance. Wilczynski cautiously concludes that “some views resembling the basic principles of Darwin's future doctrine are undeniably to be found” in Alberuni (Wilczynski, 466). Spengler acknow­ledges that arguments such as these “led some to look upon Alberuni as a precursor of Darwin” (Spengler, 1971a, 95—96).

The other closely related theme, the “population-food” dilemma, emanates from this astute observation by Alberuni: “The life of the world depends upon sowing and procreating.

Not only is Alberuni aware of the aforementioned dilemma, but he also provides an early version, or at least an awareness, of the law of diminishing returns:

The agriculturalist selects his corn, letting grow as much as he requires and tearing out the remainder. The forester leaves those branches which he perceives to be excellent, whilst he cuts away all others. The bees kill those of their kind who only eat, but do not work in their beehive.

(Alberuni, vol.I, 400)

According to Spengler, “Alberuni points out that since the growth of man's numbers is limited by the capacity of the environment to provide support, the earth could become overpopulated and in need of a thinning of its numbers” (Spengler, 1971a, 96). Spengler concludes that Alberuni failed “to put forward a rational explanation and to postulate [a] natural corrective mechanism.” However, borrowing from Plato's Laws and Timaeus, Alberuni discussed demographic situations and unavoidable disasters which destroy communities and force survivors to begin anew, bringing civilization and its accompanying evils and vulnerabilities back into existence. Thus, it is clear that Alberuni does provide some economic-demographic implications of the shrinking economic base.

With respect to the population theory, Spengler concludes that Alberuni recognized (1) “the growth of anything is limited by the environment accessible to it,” and (2) “since the capacity of growth of a species is unlimited, its actual growth is restrained by limited and (apparently) almost exclusively external agents.” Then, Spengler argues that Alberuni “did not seek to identify, as did Malthus, the natality-curbing as well as the mortality-curbing checks” on population (Spengler, 1971a, 101). However, upon closer scrutiny, one finds that Alberuni does discuss some of these checks (“deluge or an earthquake,” “contagious and other diseases, pestilence, and more of the like”). Furthermore, he must have been aware of the only natality-curbing check known at the time (“coitus interruptus”) which had been condoned by Judeo-Christian- Islamic traditions centuries earlier. Eight hundred years later, Malthus talked in similar terms, including marital postponement, celibacy, etc. Interestingly, Spengler acknowledges that “Alberuni expressed himself much as did Malthus nearly a millennium latter, though without anticipating Darwin” (Spengler, 1971b, 160).

Further, one must speculate if Alberuni's works were available to Malthus and Darwin as background for their discourses, just as Malthus' work was accessible to Darwin (Spengler, 1971a, 95). Certainly, much of Arab-Islamic scholarship was translated into Latin during the “age of translation” covering the tenth to thirteenth centuries. There is evidence that Adam Smith had numerous volumes of Greek heritage in his own library (Lowry, 1979, 72), and he makes numerous references to Arabs in his Wealth of Nations (1776). It is quite possible that Darwin and Malthus had access not only to the Greek literature via Arab mediation, but also to the Arab-Islamic literature via their Latin translations.

Abu-Hamid Al-Ghazali (1058-1111)

This eleventh-century Arab-Islamic scholastic has been “acclaimed as the greatest... certainly one of the greatest” (Watt, 1963, vii), and “by general consent, the most important thinker of medieval Islam” (Bagley, 1964, xv). Al-Ghazali was born in Tus (in Persia) but then lived for a time in Baghdad and Damascus, before returning again to Tus. While the influence of numerous Arab-Islamic writers upon European scholastics is well-known, Al-Ghazali's role is especially significant in the following respect. According to Myers, “since Al-Ghazali placed science, philosophy, and reason in position inferior to religion and theology, the Scholastics accepted his views which became characteristic of most medieval philosophy” (Myers, 40). Further, Al- Ghazali's “work was paralleled by Thomas Aquinas in the discourse on Christian doctrine and in other portions of the Summa Theologica” (Jurji, 313).

Much of Al-Ghazali's discourses on economics are to be found in his four-volume Ihya Ulum al-Din (Revival of the Religious Sciences) and his contribution to economics is remarkably sophisticated and similar to what we find in contemporary discussions (Ghazanfar and Islahi, 1990). Incidentally, the Ihya volumes “were translated into Latin before 1150” (Myers, 39). Al-Ghazali's economics begins with a rather well-defined social-welfare function, based upon specific socio-economic goals as well as guidelines for the “prioritizing” of individual and social needs (material and non-material). He discusses a hierarchy of needs-necessities, conveniences or comforts, and luxuries, reminiscent of the Aristotelian tradition.

More specifically, Al-Ghazali’s scholarship reveals deep understanding of a voluntary market­exchange that “naturally” evolves among free individuals guided by self-interest and mutual necessity, in an environment where there is competition as well as cooperation. He shows rather astute awareness of the operation of markets and price-determination through the forces of demand and supply, including shifts in them due to factors other than price. Further, he develops a detailed code of ethics concerning participants’ market behavior. And, while warning against worldly evils, Al-Ghazali acknowledges — indeed, mandates — the need for economic pursuits, both private and public (Ihya n.d., vol.II, 60, 83). In fact, he accords such activities an aura of piety and nobility by constant reminders as to their religious sanctity — a “calling” (Ihya n.d.,vol.II, 63, 249).

When discussing productive behavior, Al-Ghazali provided a tripartite hierarchy of production activities: basic industries (agriculture), ancillary (manufacturing), and complementary (processing and services). He talked in terms of interdependence as well as stages and linkages in production — e.g., anticipating Smith, “the farmer produces grain, the miller converts it into flour, the baker prepares bread from the flour” (Ihya n.d., vol.IV, 128). And, he recognized the need for a division of labor and specialization in all economic endeavors: analogous to Smith’s pin-factory example seven centuries later, Al-Ghazali elaborated these concepts by using the example of a needle (Ihya n.d., vol.IV, 119).

Al-Ghazali began with a barter-system in discussing voluntary-exchange behavior, and then identified associated problems such as the lack of double-coincidence of wants, indivisibility of goods due to lack of a common denominator, and limited specialization (though he did not use such contemporary terms). He defined various functions of money, much as one finds currently, the most important being the medium of exchange. Then he discussed the use of gold and silver coins, and after arguing that money itself was “useless,” he criticized its con­version into other objects. Further, he discussed the harmful effects of counterfeiting and currency debasement, anticipating similar observations by Nicholas Oresme during the fourteenth century, and Thomas Gresham, Richard Cantillon, and others much later. Indeed, Al-Ghazali developed an early version of the “Gresham’s Law” (“bad money drives out good”). Further, as with other Arab-Islamic and European-Latin scholars, Al-Ghazali condemned usury, for it causes money to deviate from its key function — i.e. a medium of exchange.

Al-Ghazali wrote a special treatise on the role of the public sector in the economy. He discussed the topics of public finance-taxation, spending, and even borrowing. He considered the state as a necessary institution, not only for the proper functioning of society’s economic activities but also for the fulfillment of social-welfare objectives. Further, in order to promote economic prosperity, the state must establish justice, peace, security, and stability. He even insisted on a state institution, quite common in the Islamic civilization, called “al-Hasbah,” meaning “accountability.” The official who enforced accountability was called “mohtasib” (the closest English term would be “ombudsman”), whose main function was to check any harmful activities of markets. As for the conduct of the ruler, Al-Ghazali recommended ten “principles ofjustice and equitable treatment of the subjects” (Counsel, 13—31), and each is discussed not only from the Islamic perspective, but also with illustrations from the Torah, the Bible, and other historical sources (including Chinese). And he relied on the inherited Greek heritage, frequently referencing Plato and Aristotle.

When discussing taxation, Al-Ghazali advocated the well-known ability-to-pay principle of tax justice, although he was aware of the benefits-received concept. He was critical of malpractice and corruption in tax administration. With regard to public expenditures, he discussed various functional categories (though not in the manner one finds in contemporary texts) not simply for promoting social welfare, but also to promote economic development. He suggested several items of public expenditure, usually labeled as “socio-economic infrastructure” in present-day terms. And, he was aware of the need for efficiency in the use of public funds, for they are a “public trust.” Indeed, given the hierarchy of society's needs, Al-Ghazali suggested guidelines for “prioritizing” public expenditure (Ghazanfar and Islahi, 1992).

Nasir ol-Din Tusi (1201-74)

Nasir al-Din Tusi is credited with a treatise focusing on public finances (Risala-e-Maliyat, or Treatise on Public Treasury). Tusi argued that the encouragement of economic enterprise requires that the burden of taxation on society should be kept to a minimum. Further, he emphasized that the foundation of economic prosperity was agriculture, trading and other activities being secondary, and argued for moderate expenditure and against conspicuous consumption (B.H. Siddiqi, 571).

Another well-known book by Tusi (originally written in Persian, but also available in Arabic, Urdu and English) is Akhlaq-e-Nasiri, or The Nasirean Ethics, a book on practical “domestic and political disciplines.” Tusi devotes a special chapter, entitled “Siyasat-e-Mudun,” to discussing economic issues for a “civic society”: the first word (“siyasat”) means “politics” and the second (“mudun”) means “cities and their economic structure.” Thus, Tusi's focus is the “political economy” of society. It is often argued that the term “political economy” originated with Antoine de Montchretien's Traite del'Oeconomie Politique published in 1615 (Lowry, 65). However, Tusi's analysis clearly locates the concept in the twelfth century.

This emphasis becomes evident from his discussion, and in order to appreciate Tusi's economics, a part of his text follows:

If every person had to remain occupied in producing his own food, clothing, shelter and tools respectively. He could not have survived because of becoming foodless during the long period required (for supplying the above things). However, since people cooperate with each other and everyone adopts a particular profession, producing more than what is sufficient for his own consumption, and since the laws of justice take care of the matters pertaining to the exchange of one's surplus output with the products of other people, economic means and goods become available to all. Thus God diversified people's activities and tastes so that they might adopt different professions (to help each other). It is this division of work which brings into existence international structure and mankind's economic system. Since human existence does not acquire a shape without mutual cooperation, and since this cooperation cannot take place without social contact, hence man by nature is dependent upon society. It is this dependence of man on society which we call as “tamaddun” (or “mudun,” i.e., cities or economy). The word “tamaddun” is derived out of “madina” which implies an assemblage of persons who cooperate with one another by adopting various crafts and industries in order to provide comforts of life. This is exactly the meaning of the statement that man by his very nature is social.

However, if we were to leave every person to do whatever he liked, there may be no cooperation and the strong one may subdue the weak one and the greedy person may collect all the things for himself, and so because of the quarrels people may start exterminating each other. Hence it is necessary to take practical steps to ensure that every man gets his due share, is content with what he deserves, does not encroach upon the rights of others and pursues his own interest in a spirit of cooperation. Taking of such steps is called “siyasat,” or politics.

From all this it is clear that “political economy” is a science which studies uniform laws of public welfare, meant to encourage mutual cooperation for attaining real progress, and that its subject-matter is that structure of society which emerges out of the assembling of human beings and which serves as a source of their activities directed towards the perfection (of their occupations). Thus, every craftsman (or producer) concentrates on his craft, not because it is good or bad, but due to the fact that he belongs to it (i.e., has specialized in it according to social requirement).

(Tusi, 1952, 241—6)

The purpose of reproducing this lengthy quotation is two-fold: to demonstrate that the term “political economy” had been clearly defined by this Arab-Islamic scholar as early as the twelfth century, and to indicate that Tusi took considerable interest in explaining the conception of the discipline that this term represented. His definition lays emphasis on two key themes — the division of labor/specialization, and the promotion of public welfare through the political structure of society.