Pillars of an Islamic Welfare State!

Finding an Answer to Iqbal’s Question – in the Footsteps of Jinnah

In my previous article I pointed out that Iqbal had noted in his letter (dated 28^th May 1937) to Jinnah: “The atheistic socialism of Jawaharlal is not likely to receive much response from the Muslims. The question therefore is how is it possible to solve the problem of Muslim poverty? And the whole future of the League depends on the League’s activity to solve this question.” With this in mind I went on to say that the Muslim League’s future was therefore only till what they had managed to answer and was destined to see its end when the time for the next question came – a course which the coming years had taken and are now a part of League’s history.

The Planning Committee which Jinnah had formed in 1943 with the aim to chart out a five year plan for the socio-economic uplift of Pakistan could not complete its objective due to the turn of events in the short span of time. Taking lead from Jinnah’s advice that in any such plan ‘our ideals should not be capitalistic but Islamic,’ we must return to completing this work initiated by Jinnah so as to find the answer to Iqbal’s question.

Saleena Karim in her book ‘Secular Jinnah’ (2010) attributes the usage of the term ‘Islamic socialism’ to Jinnah himself ‘as well as the early leaders of Pakistan.’ Furthermore, she states: ‘Liaquat Ali Khan considered the abolition of landlordism a necessary step towards establishing this Islamic Socialism.’ But the certainty in the need of abolishing ‘landlordism’ is not enough unless one comes up with an alternate which is consistent with the ideological foundations of the country and thus the constitution. Similar is the case in dealing with every other economic malaise – which will not go away unless a more feasible and consistent alternative is put forward.

UNDERLYING FRAMEWORK of ‘ISLAMIC WELFARE STATE’

The concept of ‘Islamic socialism’ or more recently ‘Islamic welfare state’ (IWS) has often resurfaced and mostly as a campaign mantra of the political parties. However, its specific pillars largely remain undefined. A stop gap measure has often been Islamicizing the welfare model of Scandinavian countries by introducing zakat and other such Islamic features to it. But doing this is largely plagiarizing what may look similar but is distinctly different from the principles of IWS which evolved during the time of the Prophet, peace be upon him and his family, and on which the earliest Muslim Caliphate was based.

As the term suggests, a simple but technical definition of a welfare state is where State manages the economy so as to maximize the overall welfare of the society with the objective to fulfill the basic needs of its citizens and ensure an equitable distribution of wealth.  The ‘Islamic welfare state,’ as understood from the hadith literature, is explicitly different from the ‘modern welfare state’ in that it is extremely market based – forbidding majority of government interventions in the market mechanism except regulatory and what has been declared illegal by the religious law. For example, the fundament pillars of IWS do not allow for either minimum support prices or minimum wages which must be determined by the market. However, this presumes a competitive market mechanism rather than a monopoly/monopsony – not to be allowed by the State.

State intervention, with respect to achieving its welfare goals, takes the form of lump-sum transfer – in the form of social security (via zakat and taxes) and providing for the needs of basic health, education and public goods (via taxes and interest free borrowing) – only after market has allocated the resources. Furthermore, nationalization of all sorts of private property (eg. farms and industry) and similarly privatization of all public property (eg. parks, natural resources and dams) is discouraged and not allowed unless under special circumstances and at the discretion of the head of the state. Thus the state has no role in directly intervening in the markets and running businesses unless the social returns are greater than private returns in which case the entity should be run as a public service with no profit/loss orientation.

REGULATORY REGIME

Land and Agriculture: While there is almost no state intervention in the markets, there is strong underlying regulatory framework which surfaces after a closer look. For example, with respect to land reforms, in an IWS any state land can be utilized by anyone of the citizens for agriculture without any formal permission - although State can formalize this if it wants to. More importantly, if the land remains un-utilized for 2 years (or 3) then the state is required to take it away and give it to others for cultivation or keep it to itself. Much emphasis is also laid on the appropriate distribution of farm income between land owner and farmer – from 1/3 to 1/2 going to the famer depending on who provides the water etc. Similarly, towards the revenue side, the farm output is taxed from a minimum of 5 to 10% of the output depending on if the water is provided through rain or irrigation, respectively.

Corporate Finance and Banking: Other such regulations include that any CEO or Board members of the company – who make business decisions – have to be shareholders at the same time. Simultaneously, such decision makers (who are also shareholders and thus have their incentives aligned) must be given autonomy in their decision making. Moreover, forward buying and selling are considered against the Islamic principles which do not allow an object to be sold as long it is not in the possession of the seller. Similar is the case about Options pricing. Both these transactions are viewed as a transfer of risk such that one person’s benefit is other’s loss and thus equivalent to gambling. By the same principle applicable to forward buying and selling, banking practices of fractional reserve banking where an X amount of cash deposit is made to lend a total of roughly 10X, given a reserve ratio of 10%, also requires considerable review.  In all likelihood, an X amount can only be used to make a total loan of X amount under the Islamic framework.

Other Interventions and State Finances: Last but not least, State is expected to assist the poor in paying back their loans if they fail despite all efforts. In this regard, if the State decides to pay off the loans itself, it is to be paid back in full irrespective of the interest payment. It is beyond the State’s jurisdictions to get any part of the loan written off unless voluntarily undertaken by the lender. Although the State itself is not allowed to fund its expenses from the interest based borrowing, it can raise revenue through taxation before undertaking the intended project. Other sources of government finances are income from natural resources etc and interest free borrowing primarily from its Central Bank and from the public through non-interest bearing prize bond schemes.

ECONOMIC PROFESSION and the ISW PILLARS

These are just some of the key pillars of ISW, based on the extensive hadith literature, expressed in the language of modern economics. Many of the theoretical economic foundations of these pillars are well known and agreed upon by the majority while others remain disputed between the academic circles, eg. economics of minimum wages. Few on the other hand, such as interest free financing of government expenditure, are too alien to even be considered in the economics profession such that I do not expect any serious research on this subject in any near future. However, the intention is not to replicate the West or the East but to innovate our own system so as find an answer to Iqbal’s question of ‘Muslim Poverty’ based on Jinnah’s words: ‘our ideals should not be capitalistic but Islamic.’

note: picture from lyndit.com

Solving the puzzle: The clue lies with Iqbal, not Jinnah!

Saleena Karim in her book ‘Secular Jinnah’ (2010) attributes the usage of the term ‘Islamic socialism’ to Jinnah himself ‘as well as the early leaders of Pakistan.’ Furthermore, she states: ‘Liaquat Ali Khan considered the abolition of landlordism a necessary step towards establishing this Islamic Socialism.’ However the subsequent social and political developments lead to a constitution which clearly intended to be based in the ‘Islamic ideals’ as understood by Iqbal and Jinnah but was at the same time inconsistent. No wonder, she says, the opposition leaders of the time ‘raised some legitimate criticisms’ on the then proposed constitutional framework so as to promote their notion of ‘modern democratic state’ – the term falsely attributed to Jinnah in Justice Munir’s book ‘From Jinnah to Zia’ (1979).

Why was it then that the intentions could not result in the necessary actions required to innovate a new socio-political and economic system of governance based on the ‘Islamic ideals’ for which Pakistan was created? Part of the answer is the early death of the ideological fathers of Pakistan thus leaving an intellectual gap which was not filled. But this does not do justice with the immense significance of the question and is only a way of avoiding it by pretending to having answered it.

Jinnah had abhorred the ‘modern democratic form of Government’ in his address to the Hostel Parliament of Ismail Yusuf College (dated 1^st Feb 1943) while demanding ‘a true democracy in accordance with Islam and not a Parliamentary Government of the Western or Congress type.’ Later in the same year, Jinnah said in his Presidential address at the Muslim League’s Annual Session (dated 24^th April 1943), “I have no doubt that a large body of us visualise Pakistan as a people’s government.… The constitution of Pakistan can only be framed by the millat and the people.”

The using of the words ‘large body of us’ makes it clear that ideology of Pakistan was well understood by the Leaguers’ and the notion of Jinnah’s death leaving behind an intellectual gap is overemphasised. The intellectual clarity of the ‘large body of us’ which Jinnah left behind can be depicted by their debates with the opposition during the first Constituent Assembly and unanimity on drafting of the constitution by the ‘people’s government’ in ‘accordance with Islam.’ This brings us back to the above question to which the answer, in fact, lies not with Jinnah but with Iqbal.

In one of the letter to Jinnah (dated 28^th May 1937), Iqbal wrote, “The atheistic socialism of Jawaharlal is not likely to receive much response from the Muslims. The question therefore is how is it possible to solve the problem of Muslim poverty? And the whole future of the League depends on the League’s activity to solve this question.” With Iqbal’s death, all the energies of the League shifted towards manoeuvring the realities of the time so as to achieve their political objective. The league’s future was therefore only till what they had managed to answer and was destined to see its end when the time for the next question came.

While the Leaguers’ knew what they did not want for Pakistan – Secular Capitalistic Democracy of the West and Atheistic Socialist Communism of the East – they had not yet answered Iqbal’s crucial question. This is apparent from Jinnah’s address at the Opening Ceremony of State Bank of Pakistan. Jinnah categorically refuted the notion of adopting the ‘economic system of the west’ which ‘created insoluble problems for humanity’ and propagated for ‘evolving banking practices compatible with Islamic ideas of social and economic life’ and hence the term ‘Islamic socialism.’ However, nowhere in the Leaguers’ speeches does one find what these ‘practices’ or principles were except in broader terms of equality, freedom and socio-economic justice as embedded in Islam.

In fact, Jinnah had formed a Planning Committee in 1943 to chart out a five year plan for the socio-economic uplift of Pakistan. The Committee – consisting of economics, engineering and other professionals – held its first meeting in September 1944 and was advised by Jinnah in the following words: ‘Our ideals should not be capitalistic but Islamic.’ However, the Committee could not complete the second phase of its objective of focusing primarily on Pakistan specific areas due to the turn of events in the short span of time.

It is my understanding that the success of Pakistan lies in returning to completing the work initiated by Jinnah so as to find the answer to Iqbal’s question. However, it is highly unlikely to escape the shackles of both ‘capitalism’ and ‘socialism’ in our pursuit towards reaching our destiny without having understood the Islamic socio-economic view. And for this goal of applying ‘Islamic ideals’ to create our distinct socio-economic system promising justice and mutual wellbeing, the starting point is to study their first hand application by the very person who introduced such ‘Ideals.’

 

Note: Quotations used have been taken from Saleena Karim’s book ‘Secular Jinnah’ (2010).