Public vs. Private Sector:
Policy Dynamics in an Islamic Perspective
Dr. Mohammad Omar Farooq
A paper presented
at the Islamic Economics Research Bureau
(Dhaka Bangladesh, 1989)
while a Ciriacy-Wantrup Post-Doctoral Fellow
at the University of California - Berkeley (1988-89)
Introduction
The role of private enterprise in general and ownership in particular has been one of the most discussed topics in the literature of Islamic economics. Since the issues of public vs. private sector is fundamentally related to property rights, "...every important writer has touched on the subject and all the different approaches to the Islamic reorganization of the modern economy show themselves in the treatment of property rights in Islam" [Siddiqi, p. 196]
The treatment of these issues so far has been primarily philosophical and polemical, which is gradually being replaced by "analytical study conscious of its relevance to practical affairs" [Siddiqi, p. 193]. The contributions so far has been at the theoretical level because there was no opportunity for these contributors "to manage the economy and solve its actual problems in the light of Islamic injunctions" [Siddiqi, p. 192].
This situation has changed since the Islamic Revolution in Iran in 1979 that led to the establishment of the first Islamic State in our contemporary time. Although Muslim experts outside the Islamic Republic has little opportunity to directly contribute in the process of policy-making and implementation in the Islamic Republic, many of us are keenly observing the debates that are shaping up there as the Muslim people of the Islamic Republic and their institutions try to address the practical problems and choices facing them.
The purpose of this paper is quite limited. This paper attempts to expose the dynamic nature of the problems and choices, which requires broadening of our search for norms to also a search for the transition path toward those norms.
The Status of the Debate
The issue of public vs. private enterprise has been at the center of public debate in the Islamic Republic since the beginning of the Revolution. The nature and extent of the debate is a reflection of the ongoing debate in the literature of Islamic economics, the only difference is that in the Islamic Republic, it is a practical problem that needs resolution at the earliest opportunity and has significant political implications.
Siddiqi identifies three main points around which differences on this issue in the literature of Islamic economics usually center:
Siddiqi [p. 196-200] offers a succinct exposition of the positions taken from genuine1 Islamic perspectives by eminent Muslim scholars. 'Abdul Qadir 'Audah is among those eminent scholars who deny a central position to individual ownership rights. Baqir al-Sadr is also "critical of the view that individual ownership is the rule and public ownership is the exception. He regards individual ownership, state ownership, and communal ownership as three forms existing parallel to one another in Islamic Law." Mawdudi regards individual ownership as norm and prefers minimum state intervention, but keeps the options for social actions open as social conditions require. There are those who view that individual ownership is the norm, except in the case of natural resources. According to Abdul Hamid Abu Sulaiman, "Private ownership of land, capital, or other natural powers cannot be allowed to become a means of exploiting other individuals and subjugating them." However, one of the relevant points on which there exists a complete consensus is the emphasis on "the need of ensuring the fulfillment of basic needs of each and every individual and justification of social action as may be necessary for that purpose" [Siddiqi, p. 199].
The Traditional Approach toward Formulation of Islamic Policy
Since this debate has both socio-economic and Shar'i dimension, the adherents of the views mentioned above derive their views based on their understanding of al-Qur'an and as-Sunnah and the relevant legacy of Islamic Fiqh. After identifying a problem, the verdict is sought by the religious specialists, jurists, and scholars following a deductive approach to determine the ranges of permissibility and evaluate the compatibility of particular policy options with the Shariah. In this regard, usually the problems and the related policy options are evaluated in terms of what is perceived and/or agreed upon as "norms." That is why most of the relevant literature contains discussion about what are the economic norms in an Islamic society. In the Islamic Republic too, the debate that brewed up since the beginning of the Revolution appear to be (and, indeed, is) in terms of the perceived norms. By norms are meant the conditions to be observed in a mature, stable, and full-fledged Islamic society.
Although there is significantly different implications of alternative norms, studies limited to finding those implications do not offer a functional approach toward seeking solutions to specific problems. Parallel to the study of norms, how a society reaches the stage where norms are applicable and expected to be observed, i.e., the transition stage, is usually is ignored. The relevance and importance of this neglected transition stage is very succinctly presented by Naqvi [p. 146-147].
"A long distance - spatial, temporal, and intellectual - separates us from the Islamic El Dorado. Inevitably, a 'transition period' must intervene before the Islamic economy can be made fully operational. It would involve unceasing intellectual effort to recognize the 'best' way of reaching that idea through a conglomeration of social and economic forces which achieves material prosperity and spiritual bliss within the unitary framework of Islamic thought. In many ways, the transition period is the most interesting and the most challenging part of the total effort required for a complete Islamization of the present-day societies."
With proper and adequate analysis and understanding of the transition period, one may be surprised to think about situations in which programs of reform can worsen the existing situation. During the transition period, internal contradictions may arise, because
"... policy instrumentals which properly belong to an Islamic economic system may have to be grafted on to the existing economic systems. For instance, it is easy to conceive of situations in which such a grafting operation may actually worsen social welfare by enhancing economic inequities. Hence, Islamic reform, instead of moving society towards the ideal state, may push it away from the final goal. And this may happen even if the policy instruments are Islamically legitimate."
Therefore, success of any reform program in an Islamic State would crucially depend not only on determining the "norm," but also on correctly developing strategy for the transition period.
Toward a Goal-seeking and Problem-solving Approach
In a goal-seeking approach, goals and means are appropriately identified and categorized, acceptable range of means are evaluated in terms of their relevance and relative efficacy in meeting the goal(s). The applicable constraints are also identified and the process(es) by which goals are met are analyzed. Similarly, in a problem-solving approach, a problem is identified, it is studied to determine its nature and extent, and solution is sought. A goal-seeking approach can be considered problem-solving in the sense that meeting a goal through various acceptable means does constitute a problem. Problem-solving approach may differ from a purely deductive approach in which only a given problem is considered and verdict is sought and given; those who give verdicts or formulate their opinions usually do not study the problems themselves.
Before any resolution regarding the issues of private vs. public sector is considered, one must determine the goals of an Islamic economy in an Islamic society. At the mot aggregate level, the goal of an Islamic economy in particular and Islamic society in general is to establish a "just social order." When this goal is disaggregated, a set of functional goals can be identified the fulfillment of which, subject to applicable constraints, is the purpose of the Islamic economic system. Whatever norms are deductively derived, the function of the economy would be geared toward meeting these goals.
These distinguished goals are:
These goals are to be attained subject to, at least, two explicit constraints (parameters): (a) elimination of interest (riba); and (b) prevention of concentration of wealth that results into widening inequality.
Creating a just social order that ensures fulfillment of basic needs of every individual, primarily through generation of employment, is the ultimate goal. In addition, income inequality must be kept at a desirably low level. A healthy process of transition from the current conditions to the ideal state requires: (a) evaluating alternatives, in this case public vs. private sector, as to which alternative is more suitable for achieving the ideal state; (b) finding which alternative may be more suitable than the other at different phases of transition leading to the ideal state; and (c) initial conditions are set such that the transition period becomes viable and goal-seeking.
Those who are debating the role of the state in the functioning of the economy and the organization or reorganization of the economy have to take into consideration the initial conditions in terms of past accumulations and concentration of wealth and means of production. This is crucially important because future distribution and attainment of the basic goals would be primarily determined by the initial distribution. It must also be noted that accumulation and concentration of wealth and capital and the socio-political power go hand-in-hand.
It is generally agreed that if past concentration and accumulations were through wrong, unjust, and corrupt means under unislamic system, then the Islamic State has all the rights according to Shariah to confiscate them and redistribute and/or reorganize. However, if this approach is taken for each individual case and the state fails to establish such ground against such individuals, then the role of the state is not clearly defined. However, if it is recognized that the existing initial conditions are utterly unsuitable for a transition path leading to the ideal state, then appropriate means within the Shariah have to be sought. Indeed, it is generally agreed that the Shariah provides wide leeway for meeting the fundamental goals of the economy. For attaining the ultimate goal, "the State shall interfere with private wealth to the extent socio-economic justice demands" [Siddiqi, p. 210].
Now if the problem of unacceptable initial distribution is recognized and also it is recognized that sectoral structure as well as ownership pattern is more in the category of means rather than goals, then one possibly has a better perspective on these issues. If significant redistribution is necessary to set the initial conditions at a suitable level, then there would be greater role of the public sector during the transition period; the extent of the sector will gradually diminish to make room for private or cooperative enterprise. The debate on the norms about sectoral issues would be incomplete, misplaced, and misdirected if they are not considered in the context of the dynamic path of transition.
Endnotes:
References:
Naqvi, Syed Nawab Haider. Ethics and Economics: An Islamic Synthesis ( Leicester, UK: The Islamic Foundation, 1981).
Siddiqi, Muhammad Nejatullah. "Muslim Economic Thinking: A Survey of Contemporary Literature in Studies" in Islamic Economics, Khurshid Ahmad (ed.) (Leicester, UK: The Islamic Foundation, 1980)
HOME
Index of my writings
Have you visited my site on Kazi
Nazrul Islam?
Genocide
1971 Page?
Hadith
Humor Page?