Re-Thinking Economics Part 10

A Toothless Government?

It seems that Shariah-based economy system is vehemently allergic to big government. But does that mean Shariah-based economy is a laissez-faire economy? Are the merchants and companies free to operate without any regulation?

Supreme Court Building
Supreme Court Building by Jeff Kubina

Well, not really. Keep in mind that Shariah-based economy system already curtailed large concentration of wealth and power. Thus it is unlikely for the merchant class to do as it please with impunity. Not only big government is unfavorable, mega corporations are also suspect.

The life of Muhammad in Medina provide some clues as to which extant regulatory powers a government should have. In a hadith, the Prophet went to the market and inspected the quality of goods. He queried a fruit seller why he hid the defective fruits behind the good ones.

In another hadith, strong condemnation had been made on those who made false claims in order to sell his goods. This is in line with the prohibition of gharar (uncertainty) in Islamic transaction rule. In other words, Shariah-based economy demands transparency.

Not only that, sellers must also be forthcoming when he’s selling something at loss. It must be for a genuine reason. (Eg; Keeping the unsold stocks cost him significant amount of money) Perhaps this is to prevent price war tactic to pressure a smaller competitor out of the market.

Speaking of competition, there’s a story of Ali asking a seller to dismantle his stall that has advantageous position at the market. He said that the market is like the mosque, no one can reserve a spot. Those who want a coveted spot must come early.

In a similar vein, the Quran also specifically mentioned about willing buyer and willing seller. It can be interpreted in several ways, one there shouldn’t be any undue influence to conduct a transaction. The image of rich people forcing poor people to sell their land readily comes to mind.

Secondly will buyer also implies that the buyer must have a choice of sellers. There can’t be any choice if there’s monopoly in place. Thus we can reason that the government must have the power to enforce effective anti-monopoly laws.

The government must also be able to crack down on hoarding of essential goods — which make sense in a market with derestricted prices. If hoarding is allowed, price of commodities can easily go up due to artificially low supplies.

There’s no contest that the government must ensure safety of people from external threats. But how about internal policing? Here the shariah criminal code come into play — although now usually erronously equated with hudud alone. It actually encompasses qisas, hudud and takzir.

The punishment under hudud are severe but the the conviction is also exceptionally strict. It is designed more of a deterrent rather than a penal code to control the society. Punishment are handed out publicly to instill fear from committing crime but not fear to the government. Better to punish very few, letting most of criminals get away than committing injustice or stuffing lots of criminals in jails.

One implication of implementation of shariah criminal code is that crime rate is reduced. With reduced crime rate, the cost of using the market is also lower. One does not have to worry about theft and murder so there’s no need to spend of guards, locks, security sytem, CCTV, etc. Heck, even POS for that matter!

Beware that shariah criminal code, especially the hudud is not a magic bullet. It can only be implemented after the structural inequality and injustice had been corrected. Hudud in an unjust society could be more of a potential problem leading to abuse of power rather than an instrument of justice.

Another way to look at is that hudud is a capstone to the socio-economic and political reform brought by Islam. The final stick after handing out so many carrots to the people, so to speak.

Thanks for following this article series. We’ll wrap up in the next article by summarizing the key features and patterns of Shariah-based economic system.