AL-GHAZALI ON ECONOMIC ISSUES AND SOME ETHICO-JURISTIC MATTERS HAVING IMPLICATIONS FOR ECONOMIC BEHAVIOUR
The central focus of Imam al-Ghazali (1058-1111 AD), a great philosopher and sufi (Islamic mystic), was Islamic philosophy and Islamic ethical values, which compass all dimensions of life including economics. As such his discussion of economic issues emerge in the ethical perspective of human life as a. whole, rather than a segregated value-neutral discipline as it appears in the contemporary economic analyses and systems. Hence his analysis is generally normative rather than positive in nature.
Al-Ghazali was writing in the 11th and early 12th centuries which were roughly six centuries before the emergence of Mercantilism and seven centuries before Physiocracy and Adam Smith (1723-1790), that is, roughly six to seven centuries before the beginning of economics as a discipline. Even then, it is interesting to note that al-Ghazali's writings contain a good number of economic ideas, although discussed in the ethical normative perspective.
Life and Time
Born in 1058 in a village called Ghazalah of northern Iran, Abu Hamid Muhammad al-Tusi al-Ghazali was a great Islamic scholar in a number of subjects including philosophy, sufism, theology and jurisprudence. A son of a poor but righteous spinner, he lost his father at a young age and began study with his father's sufi leader and friend, then joined a madrasah (a religious institution), and gained knowledge from several reputed scholars of the time. His reputation as a scholar made Nizam al-Mulk al-Tusi to appoint him to the Chair of Theology at the Nizamiyyah College of Baghdad in 1091 at his age of 34. Although highly successful in teaching, drawing even the jurists in his classes, he left the college in 1094, performed hajj (pilgrimage), traveled places to meet great Islamic personalities, and devoted to Sufism when he also got time for writing. Although he took up teaching positions.
The present paper is based on this classic work of al-Ghazali, the Ihya 'Ulum ai-Din, which provides a mirror image of his scholarship and personality and contains several chapters ("kitab" in his terminology) on subjects related to economics.
Economic Philosophy
Underlying every-economic system there is a philosophy, and so is the Islamic economic system. Although economics did not emerge as a system as yet, al-Ghazali's philosophical and intellectual mind did not fail to put Islamic economic thought in its proper philosophical perspective.
The philosophy underpinning al-Ghazali's analysis of economic pursuit is that economic achievement is a means to the end, and not an end in itself. Wealth is a means to the success in the eternal life. Implicit in this is the philosophy of life embodied in the concepts of tawhid (the unity of Allah), akhirah (the hereafter) and risalah (the institution of Prophethood), and also explicitly mentioned elsewhere in his works.
Man needs food to maintain good health without which it is difficult to fulfill moral obligations including seeking of knowledge and its application in actions, which includes service to Allah (SWT) and humanity. All these would require income and wealth, and hence earning has been encouraged.
Economic activity should be viewed in this perspective, otherwise this activity would lead one to ruin. On this philosophical context, economic agents may be classified into three groups. These are as follows:
Those people whose economic involvements occupy them fully so that they forget their place of return, the hereafter. They are among those who will really be ruined. Those whose concerns for the hereafter keep them away from economic activities. These are successful people. Those who get involved in economic activities for the hereafter. They are the nearest to the straight path (middle way).
According to al-Ghazali, one cannot attain the stage of straight path unless he follows the straight path in the seeking of livelihood; and one cannot make the economic achievements as a means to the success in the hereafter until he follows the Islamic norms in their economic pursuits.
The second and third categories of people satisfy al-Ghazali's philosophical criterion of beneficial economic activity. The second category of people deserves attention. These are those people who keep themselves away from economic involvement in order to concentrate in seeking the pleasure of Allah (SWT) for achieving success in the hereafter. According to al-Ghazali, they are successful people. A careful reader of the basic Islamic sources, including the Qur'an and the tradition of the Prophet (SAW) may, however, reach a conclusion which may seem to be contrary to al-Ghazali's comment about the second category. Islam never discourages one to get involved in economic activity, but rather encourages him to seek the bounty of Allah (SWT) once the salah (prayer, an Islamic ritual) is over, and discourages elements of monasticism. This is evident from al-Ghazali's discussion itself subsequent to his philosophical analysis, in Section One (al-Bab al-Awwal) "On the Merit of Earning and its Incentives" (Fi Fadl al-Kasb wa'l Hathth alaih). In this section, he presented the Qur'anic verses, the traditions of the Prophet (SAW) and those of renowned Islamic personalities to prove the need and importance of economic activity and earning to be able to fulfill one's own needs, needs of the family, social and other Islamic obligations. In addition, Islam discourages begging and dependence on others, which one cannot avoid if he refrains from earning activities. If this is so, one may pose a question about al-Ghazali's above comment: how will a person be successful in the hereafter if he avoids economic pursuits and, thus, is unable to fulfill his obligations?
Place and Benefit of Economic Activity
Al-Ghazali has written a full section, as indicated above, to show the significance, importance and benefit of economic activity and earning. Economic activity for halal (permitted) earning has a religious status, provided one follows the Islamic norms of economic activity and the objective is good, and not for pride and accumulation. He substantiated this by quoting from the Qur'an, the traditions of the Prophet (SAW) and the traditions of other Islamic personalitiesl4. The major points may be summarized as follows. First, Allah (SWT) has provided resources for the benefit of mankind and so they should work to earn them, use them, and express the gratitude of Allah (SWT). Second, economic pursuits in order to be free from the dependence on others, and to fulfill one's own need, the need of the family, need of parents, neighbors and relations, and to satisfy other Islamic obligations are considered efforts in the way of Allah (SWT), which will have high status in the hereafter, provided Islamic norms of earning have been followed. Third, economic pursuits for accumulation of wealth, pride, and for spending in undesirable things are considered as efforts in the Way of the devil. That is, the means and objectives of economic activities should be Islamically permitted and desirable.
Al-Ghazali has clarified the doubts arising from such sayings which seem to discourage economic pursuits.15 According to him, economic pursuits are condemned if their objective is to get more than needed for the accumulation of wealth and its hoarding, and not to spend in goodness and charity. This is because its implication is to make the world as one's objective, which is the root of all evils. Even worse, if one resorts to cheating, oppression and other malpractices to make money. On the other hand, if the objective is to be independent of others, meeting the needs of the life for himself and family, and to spend in goodness and charity, then the economic pursuit is better than abstinence from it.
Need for The Knowledge of Islamic Economics
Al-Ghazali included the knowledge of economic matters into the obligatory knowledge mentioned in the Prophetic tradition, "Seeking of knowledge is obligatory (fard) on every Muslim". If economic activity is encouraged so much so that it has a status of worship, its knowledge is also necessary, "Know that acquiring knowledge in this Bab (in the field of economics) is wajib (compulsory) on every earning Muslim ". This is because one must know how to deal with a problem when it arises, lest he might get himself involved in what is not allowed. One should not wait to ask around when he encounters a problem. If he does so, there is a likelihood to do what he is not supposed to do. Therefore, every earning Muslim should have the basic knowledge of the matter. In his support, al-Ghazali presents the practice of' Umar, the second caliph, who used to visit the market places and say, "He should not do business in our markets that does not have its knowledge".
It seems from his discussion that al-Ghazali is concerned with the Islamic rules of economic activity which are Islamic legal norms and values of economic activities, and are the subject of Islamic jurisprudence, discussed in the chapter of mu'amalat (socio-economic activities). In the contemporary literature, Islamic economics includes Islamic legal norms and their economic analysis. Therefore, according to al-Ghazali, the basic knowledge of Islamic economics is compulsory on every economically active Muslim to the extent of basic Islamic legal norms relevant for his activity, whether it is obtained from Islamic economic literature or from the juristic sources, through study, reading or discussion with the persons of knowledge. Such obligatory knowledge of economic activities is of many kinds (branches), of which six must be acquired by those who are involved in such activities. These are bai' (trade and commerce), riba (interest, usury), salam (forward buying), ijarah (renting), musharakah (partnership) and mudarabah (sleeping partnership for profit sharing). Al-Ghazali discussed all of them
Bai' (Trade)
Following the tradition of Fiqh literature, al-Ghazali analysed three elements (arkan) in bai': (1) the two transacting parties, the buyer and the seller; (2) the items of exchange, the goods and services; and (3) the statement of contract. This classification proves his analytical insight and perception of economics.
Al-Ghazali discussed the juristic eligibilities of persons for valid transaction. Transaction with any man or woman is valid provided the person is not minor, insane, blind or slave. The transaction of minor and insane persons is invalid because they are not mukallaf. Although a blind person is a mukallaf, he or she is unable to see the item of transaction and hence his/her transaction is invalid. If, however, the blind person appoints a wakil (representative or agent) to act on his behalf, the transaction will be valid. Arms (weapons) cannot be transacted with a non-Muslim if he comes from dar al-harb (a country in the condition of war, or a non-Muslim country).
There are six conditions for a mubi' (an item of exchange) to be eligible from Shari'ah point of view for a valid exchange. First, the item of exchange should not be impure in itself, such as dog, pig, alcohol and so on. Those items which are not impure in themselves and are useful may be exchanged. Second, the items of exchange should be useful and beneficial. On this score, snakes and rats may not lawfully be exchanged. Third, the seller should be the owner of the items of sale, or be permitted by the owner to sell them. A person is not allowed to sell even his spouse's or children's items in the expectation that they will not object to it. Fourth, the item of sale must be transferable in a Shari'ah approved manner. For example, milk in udder and fish in the water may not be sold because of the mixing of the sold and unsold items. Similarly a mortgaged item may not be sold by the owner, because it is not transferable from Shari'ah point of view until it is released from the mortgage. Fifth, the item of sale must be known with certainty, and also its quality and quantity. Sixth, the item of sale must be in the possession of the seller.
Although these conditions are juristic and normative in nature, yet these have important economic implications. First, the impure, harmful and prohibited goods and services should not be produced and traded in the country. Second, the above items will not be included in the national income accounting. Third, the items of trade should be well defined in terms of quality and quantity in order to avoid uncertainty and any probable disputes.
The third element (rukn) in bai' is the statement of contract. The offer (ijab) and acceptance (qabul) should be close to one another with a statement (word) expressing the meaning explicitly or by indication. For example, if the seller says, "I give you this for this" and he implies sale, and the buyer says, "I accept it", it is allowed, because the meaning of such statement is sale and purchase. There should not be any condition in the transaction which is contrary to its contract. This shows Islam's concern to make the transactions clean and clear to keep them free from anything that may lead to disputes.
Social Cost and Oppression
The analysis of social cost in economic activities is a very recent phenomenon in the conventional economics, a matter of late 20th century. Al-Ghazali analyzed this concept under the title "Fi Bayan al- adl wa Ijtinab al-Zulm "Mu'amalah". He had termed the act of causing harm to others as zulm (oppression). adl (justice) requires an economic agent to refrain from activities of zulm, which he divided into two categories. First, the activity that causes harm to the public in general. Second, the action that affects the second party.
The activities which cause general social harm are of several kinds. The first is hoarding, particularly hoarding in foodstuff, which is meant to increase prices by creating an artifical crisis in the market. According to al-Ghazali, this behavior is a zulm 'am (general oppression), which is condemned in the Shari'ah. Al-Ghazali quoted several traditions of the Prophet (SAW) and a Qur'anic verse to support his position. From the Qur'an, he quotes the verse 22:25 which mentions the word zulm, and he includes ihtikar (hoarding) in zulm, which qualifies one for a severe penalty in the Day of Judgment.
One of the traditions quoted reads as follow: "Whosoever hoards foodstuff for 40 days he takes himself away from Allah's protection and Allah takes away His protection from him", elsewhere it is reported as follows, ''as if he kills all the people".
Al-Ghazali also refers to the traditions encouraging behavior of refraining from hoarding. According to him, prohibition of hoarding is general. However, storing items without causing harm is allowed. That is, the kind of commodity and the time factor should be considered in this matter.
Another kind of general social harm is the issue of counterfeit money. The use of counterfeit money affects its receiver; and if he uses it again, another person is harmed. The harm continues one after another and thus it becomes a general social harm. One's bad deed ceases with his death, but such a bad deed continues even after his death, as long as the counterfeit money is in use. Al-Ghazali quoted the tradition of the Prophet (SAW) to the effect that he who initiates a bad tradition (Sunnah sayyiah) he will bear an equivalent sin of all those who continue that tradition even after the death of the first initiator. The Prophetic tradition is general, which has been applied by al-Ghazali to economic matters. This application provides a general rule in economic behavior that the initiator of an undesirable and socially harmful practice in the field of economics and business is a severe crime, a manifold multiple of the initial crime, and hence such behavior will have to be dealt with accordingly.
Al-Ghazali provided suggestions on how to- deal with the counterfeit money. First, if one happens to receive forged money, he should throw it into the water so that it is not used anymore, or it should be destroyed. Second, knowledge of money and coins is compulsory (wajib) for the businessmen to protect the people from forged money. Third, if one can identify the forged money and still he accepts it, he will be a sinner, since he accepts it to pay it to somebody else, and not for himself. If, however, he confines it to himself and does not pay it to anybody, he will be free from sins.
Fourth, if one receives forged money to destroy it, he qualifies for the Prophet's prayer to get Allah's mercy. On the other hand, if he accepts it to pay it to somebody else, it is very bad, an action of the devil. Fifth, a counterfeit money or coin is what does not contain gold if the country uses dinar (gold coin). If the country uses a mixed coin its use is allowed without knowing the real proportion of gold in it.
This shows al-Ghazali's concern for the problem of issuing counterfeit coins or forged money by unauthorized quarters. He did not, however, provide a macroeconomic analysis of the effects of excess money supply in the form of forged money, but he took it as an undesirable individual behavior which harms the society in general. He also suggested how to deal with the problems of forged money. This suggestion is also confined to individual level. He did not discuss what should be done in this matter at the societal level through the institution of the government and monetary authority.
Functions of Money and the Theory of Exchange
One of the most important contributions of al-Ghazali to economic thought is his analysis of the functions of money (gold and silver coins in his analysis) and that of exchange, included in chapter "Kitab al-Sabr and al-Shukr". He discussed the rationale and wisdom of having money, problems of barter exchange, the role of money in commodity exchange, the need for the circulation of money as against its hoarding, and whether money may be treated as a commodity.
According to al-Ghazali, money does not have any value and benefit in itself. Man needs it as a medium of exchange. Man needs many things, including food and dresses, which he may not possess, but he may possess things in surpluses which he does not need. For example, a person has saffron, but he needs a camel to ride on instead. On the other hand, he who owns a camel may not need it, but he may need saffron instead. Therefore, there is a need for exchange which requires a unit of measure. Moreover, the owner of the camel may not spend the whole camel for saffron, and there is no measuring relation between a camel and saffron. Thus one does not know how much of saffron is worth a camel. This makes exchange difficult. Therefore, there is a need for money which can be used to measure the value of different commodities for their easy exchange with justice among the people.
Another wisdom of money, according to al-Ghazali, is that money provides human access to all goods and services. The owner of clothes owns only clothes, but the owner of money has everything. This is because the owner of money can buy whatever he likes with his money, which the owner of clothes may not be able to do. The cloth-owner may want food, but the food-owner may not need clothes. Therefore, there is a need for a medium of exchange, which is money.
Here al-Ghazali refers to the problem of double-coincidence in barter exchange which is overcome by the monetization of the economy. Thus, the functions of money are to serve as the unit of value and the medium of exchange, in order to facilitate exchange with justice.
To al-Ghazali, the use of money should be confined to its functions. The objective of alphabets is to construct words and sentences, and not the alphabets themselves. Likewise, money should be used in exchange as a unit of value. It should not be hoarded for its sake. Hoarding money is like making the ruler of a country captive so that the ruler can,not discharge his responsibilities. Money can be hoarded in two forms: (i) in money itself, and (ii) in items made of gold and silver. According to al-Ghazali, money is to be in circulation, and not to be used otherwise or to be kept idle. Money is not desired for its own sake, but rather for something else. Trade in money for earning interest makes money an end objective (like a commodity) which is zulm (oppression, or putting something in the wrong place). This is an ingratitude of Allah's blessing, which came in the form of money to solve the problems in exchange and valuation.
This analysis of money by al-Ghazali shows his insight into the nature, functions and the role of money. Al-Ghazali has beautifully explained the problems with the barter economy. He discussed the importance of monetization and analysed the two functions of money: the unit of value and the medium of exchange. Besides, he indicates how money contributes to the establishment of justice in valuation and exchange. His perception of the function of money as a store of value is also clear. However, he does not recommend store of value function of money for the purpose of hoarding. That is, to al-Ghazali, the store of value for hoarding is an undesirable function of money. He did not consider the cases where the storing value function of money may be desirable. In addition, al-Ghazali does not consider money as an exchangeable commodity and presents this as a rationale for the prohibition of interest, which seems to be quite logical to rational reasoning.
Market and Marketing
Al-Ghazali provides a fairly detailed discussion on the role and significance of trading activities, leading to the emergence of markets with the necessary marketing functions including transportation and storage. Production and consumption centers may be located in different places. For instance, a farmer needs farming instruments made by carpenters and these two activities may not be located in the same area. Farmers demand the products of carpenters, while the carpenters demand farm produce. Thus they need a meeting place for buying and selling which is called market.
The demand for commodities may not again coincide in terms of time. This necessitates the storing function of marketing. The traders and middlemen buy things from farmers, store them, and sell them to consumers when demanded. They buy things from farmers at cheap prices during harvest and later sell them to consumers at higher prices for profits. This happens not only in farm produce, but rather in all other commodities as well.
Implicit in this discussion is the idea of market forces to determine prices. The farm produce is traded at low prices during harvest when the supply is large compared to its demand. It is sold at a high price later when demand is high compared to its supply.
Buying things from the production centers and their sale in the consumer centers lead to the emergence of a group of traders. They buy food from villages and equipment from cities, transport them to where these are demanded and make a living out of such trading activities. Shipment of goods is necessary because the places are not self-sufficient in all the commodities.
This necessitates transport industry and transport operators (transport contractors or agencies). There is also a need for animals to carry goods from one place to another. Al-Ghazali refers here to the need for vehicles for transportation, which were mainly animals in his time. The transport operators and the transport users determine price for the transport service which becomes the source of income for the operators. Thus people work for each other to earn a living.
It is interesting to note that al-Ghazali's "farmer-carpenter" example for the emergence of market is analogous to the famous "butcher-baker" illustration of Adam Smith centuries later.
Economics and Islamic Values
Al-Ghazali has emphasized that economic achievements should not be at the cost of din (the Islamic code of life), which amounts to say in modern terms that there should not be a trade-off between economics and Islamic values. One should not sell akhirah (the hereafter) for dunya (the world). According to him, akhirah is the capital which a businessman should protect and develop by profits. If akhirah is traded for dunya the businessman is in a great loss; he is ruined. Because, while dunya is needed, the akhirah is even more needed. A sense of complementarily between the dunya and akhirah can be perceived from his statement that the former is the cultivating field for the latter. In his support, he presented the Qur'anic verse: "La tansa nasibaka min al-dunya", meaning "Do not forget your share of the world". Al-Ghazali interpreted this in the following words, "La tansa Ii al-dunya nasibaka minha li al-akhirah , meaning "Do not forget in the world a share from it for akhirah". That is, achieve dunya for akhirah.
Al-Ghazali's interpretation of the Qur'anic verse seems to be different from its explicit meaning which, if combined with the earlier part of the verse, apparently means that one should seek the home of akhirah by wealth, but he is not prohibited from enjoying the bounties of Allah (SWT) in this world as well. This explicit meaning is supported by a good number of Qur'anic commentaries. According to Sayyid Qutb, this Qur'anic verse provides an example of the Islamic code of life to be a balanced one, which establishes connection between the owner of the wealth and the akhirah, but does not :prohibit enjoyment of the worldly things and, instead, encourages it.3 To him, Allah has created the good things of the world for the mankind to benefit from them by enjoying them, which is a form of expressing gratitude to Allah (SWT) by accepting His gifts.
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