Macroeconomic Theory and its Failings

Macroeconomic Theory and its Failings

Alternative Perspectives on the Global Financial Crisis

Edited by Steven Kates

This innovative book focuses on the current global financial crisis and the inadequacies of the economic theories being used to guide policy. In so doing, it tackles the economic theories that have been used firstly to understand its causes and thereafter to contain the damage it has brought.

Chapter 10: An Islamic Economic Perspective on the Global Financial Crisis

Mervyn Lewis

Subjects: economics and finance, financial economics and regulation, radical and feminist economics


Mervyn Lewis WHAT IS ISLAMIC ECONOMICS? Islamic economics is a branch of knowledge that aims at analysing, interpreting and resolving economic problems with reference to the methodology of Islam. The word Islam means the ‘tranquillity’ and inner ‘peace’ (salam) that can be attained by submitting, surrendering or giving oneself up to the Will of God as manifest in the revealed law. The revelation (the Holy Qur’an) conceives human beings as the trustees of God on earth and bound by a covenant that is endorsed by voluntarily observing a compact (shari’ah) regulating life. Such compact makes no distinction between the sacred and the profane, and is inherent in the concept of trusteeship. To a Muslim, all resources are God-given, and ownership of wealth belongs to God. Individuals are only trustees and are accountable to God for their actions. Embedded in the notion of trusteeship is a call for conduct based on a code of personal ethics and a blueprint for justice.1 HOW DOES ISLAMIC DIFFER FROM CONVENTIONAL ECONOMICS? In general terms, Islamic economics broadens the scope of conventional economic analysis by exploring the religious and moral aspects of economic life. In the words of Chapra (2000: 57): The Islamic paradigm . . . gives primary importance to moral values, human brotherhood, and socio-economic justice . . . It places great emphasis on social change through a reform of the individual and his society, without which the market and the state could both perpetuate inequities. This emphasis is understandable. Islam is an avowedly norm-based way of life seeking...

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