HISTORY OF ISLAMIC ECONOMIC THOUGHT
Daniel Alves
ECON 350 - Classical Economics
June, 2024
Introduction
The development of Islamic Economics today cannot be separated from the history of
Muslim thinking about economics in the past. It is a necessity if Muslim thinkers try to make
solutions to all the problems of life in their perspective. The involvement of Muslim thinkers
in the complex life of society and the absence of separation of scientific disciplines makes
Muslim thinkers see the problems of life in their perspective community problems in a more
integrative context. This is all because the scientific wordview that they have shapes their way
of thinking to solve problems, but more importantly, it is the societal problems that are the
basis for those who build ways of thinking in forming various models of solutions in the fields
of economics, politics, social, culture, medicine etc.
In Islamic literature, it is very rare to find writings on the history of Islamic economic
thought or Islamic economic history. Islamic history books are more dominant charged with
political history. Studies that specialized on the history of Islamic economic thought is the
writing of Muhammad Nejatullah Ash- Shiddiqi which entitled, Muslim Economic Thinking,
A Survey of Contemporary Literature and his article titled History of Islamic Economics
Thought. The book and article written at year 1976. His presentation of this historical study is
more descriptive in nature. He has not yet conducted analysis criticism, especially against the
intellectual "crimes" This paper will not only describe the history of Islamic economic
thought but will also reveal how the transmission of classical Islamic economics to the
Western world (Western economic thinkers) and how the contribution of Islamic economics
to modern economics. This paper will not only describe the history of Islamic economic
thought but will also reveal how the transmission of classical Islamic economic science to the
Western world (western economic thinkers) and how the contribution of Islamic economics to
modern economics.
According to Muhammad Nejatullah Ash-Shiddiqy, Islamic economic thought is the
response of Muslim thinkers to the economic challenges of their time. Islamic economic
thought is inspired and guided by the teachings of the Koran and Sunnah as well as by ijtihad
(thinking) and their empirical experience. Thinking is a human process, but the teachings of
the Quran and Sunnah are not human thoughts. The object of study in Islamic economic
thought is not the teachings of the Koran and Sunnah about the economy but the thoughts of
Islamic scientists about the economy in history or how they understand the teachings of the
Koran and Sunnah about the economy. The object of Islamic economic thought also includes
how the history of Islamic economics that occurred in historical practice. Thus, this paper
only focuses on historical studies, namely how human efforts in interpreting and applying the
teachings of the Koran at a particular time and place and how the ancients tried to understand
and observe economic activities as well analyze economic policies that occurred during his
time.
So, the scope of the history of Islamic economic thought in this paper is, first, examining
how the thoughts of Islamic scientists throughout history. second, discussing the history of
Islamic economics that occurred happened actual. Appreciation the historians and economists
to The progress of Islamic economic studies is very lacking and even seems to ignore the
services of Muslim scientists. This can be seen in books on the history of economic thought
written by both Western and Indonesian authors.The Development of Economic Thought
written by Deliarnov, for example, does not include the thoughts of Muslim economists in
medieval times, whereas many classical Muslim scientists who have thought economics that
isvery advanced beyond scientists Western scientists, as will be seen later in the description.
Similarly, the book history of Economics written by Schumpeter History of Economics
Analysis, and History Economic Thought (translation), by the Dutch author Zimmerman, are
not at all include the economic thought of Islamic economic thinkers. Thus it is very
appropriate to say that the books on the history of (conventional) economic thought that are
widely written are actually European economic history, because they only explain the
economic thought of European scientists.
Many Muslim economists were born during the Abbasid dynasty, compared to the
previous khulafa' al-rashidun or Ummayah dynasty. This can be used as an excuse that the
growth of Muslim thinkers about economics is not free from the realities that grow in the era
that gave birth to thinkers who are experts in certain fields. Likewise, it can be used as a tool
to see why economics has not been established as a separate discipline in the past, and also to
find out why many Muslim thinkers were not only skilled in one field of knowledge.
Circumstances in each period
There were several circumstances that resulted in the period of khulafa' al- rashidun not
many economists were born, including (1) Al Quran and al Hadith become the main source in
running people's lives. (2) The dominance of policy is more influenced by the attitude of the
leader as a representation of the successor to the Prophet Muhammad. This makes the caliph's
decision a reference in carrying out activities in the social field. (3) The scientific capacity of
each caliph is not the same, the period of leadership of the caliph is relatively different and the
end of his power 3 caliphs ended in political tragedy;. Abu Bakar's caliphate lasted for 2
years, 3 months, 11 days. Umar bin Khattab held the caliphate for 10 years, 6 months, 5 days.
Usman bin Affan ruled for 12 years less 12 days, and Ali bin Abi Talib ruled for 5 years and 3
months (Ahmad, 2000:12). (4) There has not been much friction thought with the Byzantine
(Greek) and Sasanian (Persian) scientific mainstream, because the mastery of Greece and
Persia has not yet reached the process of assimilating scientific potential (see Hodgson, 1999:
287).
While there were not many Muslim thinkers in the field of economics during the
Ummayah dynasty due to, among others; (1) The leader's busyness in expanding new
territories which was quite labor and time consuming. (2) The government system tended to
be Arab-centric, the Arab style was very dominant in the bureaucratic system during the
Ummayah dynasty. Non-Arabs - consisting of Persian descendants - commonly called mawali
were treated as second-class citizens. This situation affected the dialectic between the
bureaucracy and the Persians, in fact, as the more educated people were not so good. (3)
Geographically, Damascus, the capital of the Ummayah dynasty consisted mostly of Arabs, so
it was far from the interaction of the outside world, in contrast to Bagdad, the capital of the
Abbasid dynasty, which was close to Cteshipon, the former capital of the Sassanid empire,
Persia. (see Saefudin, 2002: 30-31)
While progress Islamic thought at period dynasty Abbasid dynasty was caused by; (1)
The contact between Islam and Persia became the development of science and philosophy
because Persia culturally played a major role in the development of the Greek scientific
tradition. (2) There was a great deal of activity in translating Greek literature into Arabic.
According to Mehdi Nakosteen, the translation movement was influenced by the previous
translation movement carried out during the Sassanid Empire, which was centered at the
Jundishapur Academy. This academy was the center for translating Greek and Hindu works of
science and philosophy into Pahlavi. From this school also came some important translations
from Sanskrit, Pahlavi and Syriac into Arabic. (Nakosteen, 1964:33) (3) The relative absence
of territorial clearances and rebellions ensured the stability of the government so that the
government's concentration on promoting intellectual aspects found opportunities. (4) The
existence of heterogeneous civilizations and cultures in Baghdad led to a process of
interaction between one culture and another; Arab, Greek, Persian, and Hindu which had an
impact on intellectual development. Bagdad was also inhabited by the rest of the population
native Chaldaeans and Suryani. (5) Bagdad was considered strategic and profitable because it
was passed by the Tigris and Euphrates rivers. (Saefuddin, 2002: 149) Goods can go in and
out through the river using boats so that Bagdad becomes a bustling economic satellite with
commodities being traded.
Then, the science of economics during the Ummayah or Abbasid era is certainly not as
familiar today. From the above historical developments we can note that (1) Economics is an
integral part of the political, social and cultural life of Islamic society so that economic
thought in the work of Muslim thinkers is difficult to separate from political and cultural
thought. This can be proven by the number of books written by Muslim thinkers who unite
economic problems with social, political and cultural problems. (2) Muslim thinkers are
known as Muslim economists because they have documented works through written works
that can be accessed by generations after him, and or known because there are students of the
Muslim thinker who documented his economic his economic thought. (3) Every Muslim
thinker expresses economic or social, political and cultural issues influenced by the
background of each Muslim thinker's life; residence, country, occupation and others.
The development of Muslim economic thought in Europe
The development of knowledge in the Islamic world influenced the progress of thought
in the European world. The influence to Europe is through several ways as follows:
Travels.
During the 11th and early centuries 12 Several Latin-Scholastic European scholars traveled in
several Arab countries to learn Arabic in order to gain knowledge to bring back to Europe.
During this period many students from Italy, Spain and Southern France attended Muslim
studies to learn mathematics, philosophy, medicine, cosmography, and mathematics other
studies in order to be able to teach in Western universities-which were established after the
studies in the Muslim world (Sharif, 1966:1367).
Translation.
From the 11th to the 14th century, there was a great deal of translation from Arabic to
Latin, not only of Arabic writing, but from Arabic to Hebrew. This was done in Spain, Italy
and France. Some notable translators are known from medieval history such as Adelard of
Bath, Constantine the African, Michael the Sct, Herman the German, Dominic Gundisilavi,
John of Seville, Plato of Trivoli, William of Luna, Gerard of Cremona, and Aflred of Sareshel
(Durant, 1950:910) According to Crombie during the Middle Ages, the translation of Arabic
into Latin was a major undertaking 14th and 15th centuries, Scholastic Europe was also not
directly influenced by the legacy of European thinkers, they still used the knowledge of
Muslim thinkers (see Crombie, 1963: 30).
Oral Tradition
Other important influential sources in the oral tradition are insufficiently available.
According to Chejne that specifically for Oral tradition is an important factor, and this is
evidenced by the literary relationship between the Arabs and the West. According to Chejne,
oral transmission took place over a long period of time and relations were maintained between
Muslims and Christians by being bilingual in Spanish. (see Chejne, 1980:111)
Trade
Some authors point out that trade brought the Arab world through Russian roads to
Polania, the Baltic, Scadinavia, central-western Europe and Iceland. Through trade resulting
in the spread of economic institutions, Arab money was used in the Christian Kingdom of the
North, where there had been no coins for 400 years. (see Hitti, 1943:144)
Diffusion and Institutions
Udovich reports that by the 15th century, there were already various contracts of trust
and partnership between Venetians and Arab merchants in Alexandria. These contractual
forms originated in the Islamic world and eventually spread in Latin Europe through contact
with Muslim scholars and scholars legal experts. Then, the emergence of various forms of
instruments and institutions facilitating the development of commerce and trade in Europe,
such as bills of exchange (siftajah), letters of credit (hawala), specialized trading centers
(funduq) and private banks (ma'una) (see Kramers, 1934:102).
Crusades
The crusades that took place from 1092 to 1292 were a long time for Europe to use to
gain knowledge from the Islamic world. According to Ferruollo, during this period the
Muslim community helped shape European attitudes, feelings and values (see Ferruollo,
1984: 42).
Why Europeans do not recognize that Islamic science is big enough to influence the
development of science in Europe, because (1) Europe in medieval times was known to be
very hostile to the Islamic world. This made it difficult for Europeans to accept the
advantages that had been obtained by the Muslim community (Ghanzanfar, 2002:153); and
(2) Scholars at that time borrowing without telling was a common practice, besides property
rights in the 12th century were not yet recognized. In this regard, the Spanish-era priest of the
Domician order, Raymund Martin - who influenced St. Thomas Aquinas - is known to have
sourced his book Pugio Fidei from al Ghazali's Tahafut al-Falasifa, Maqasid ul-Falasifa, al-
Munqid, Mishkat ul-Anwar, and Ihya Ulumuddin, without citing the references (see Sharif,
1966: 1361)).
If traced further, let alone listen back to how the development of Muslim thought about
Islamic economics that already exists (the author described above) which can be traced since
the life of the Prophet Muhammad SAW. Adam Smith was named the father of modern
economics along with the launch of economic thought in a book entitled 'An Inquiry into the
nature causes the wealth of nations'. From Smith's thought, a tradition of scientific thought
was born Classical economics emphasizes the freedom of market mechanisms in measuring
economic activity (laises faire) without being disturbed by government policies.
Adam Smith gave an example of an economically backward society is the Indians in
North America. While an example of an advanced economic society is the Arabs. The Arabs
Adam Smith meant were certainly a nation of traders in the days of the Prophet. Because in
the next explanation he said that the nation led by Muhammad and the generations after him.
From Adam Smith's explanation, it is clear that he recognized the superiority and
greatness of the Muslim economy in the past. Therefore, it is likely that he has indirectly
adopted Islamic economic theories. The indication shows that the progress of the Islamic
economy in medieval times was felt in England, Adam Smith's homeland, even long before he
was born. In 774 AD, King Offa in England at that time minted gold coins which were a
direct copy of the Islamic dinar, including its Arabic writing. All The writing on the coin is
Arabic, except on one side it says OFFAREX.
This reality shows that the Islamic dinar was then the strongest currency in the world. In
addition, the Muslim economy was far more advanced than Europe. It showed that Muslim
international trade had reached as far as Northern Europe. In 1764, Adam Smith gave up his
professorship in Glasgow England and chose his new career as economic advisor to the Duke
of Buccleuch. It was during this period that Smith traveled extensively abroad, especially to
France. Here he met many famous philosophers. Smith began writing The Wealth of Nations
while he was in France and completed it in 1766, in Kirdcaldy. And ten years later it was
published, namely in 1776. At that time in Europe there were already translated books by
Muslim economists. In fact, in the South of France, many professors were applying the
teaching patterns they had learned from Muslim countries. The explanation above shows that
the role of Muslim scientists is very significant to the rise of European intellectualism,
including in economic thought.
In the next development of classical economic thought was not always able to solve all
the economic problems that are growing increasingly complex, one proof is the emergence of
a severe depression of the world economy ahead of World War II (malaise period). From here
then inspired the birth of economic thought that emphasizes the need for the role of
government in regulating economic activity. This thinking was pioneered by John Maynard
Keynes who is considered a modern economic figure who developed the idea of short-term
economic analysis to encourage economic growth and overcome the problems of
unemployment and inflation.
Contemporary Islamic economic thought can be categorized into three groups of schools
of thought, namely:
Baqir As-Sadr's School
Mainstream Mazhab
Alternative Mazhab
Baqir As-Sadr's School
Scholars who became pioneers of this school are Baqir as- Sadr and Ali Shariati and
scholars from Iran and Iraq. According to As-Sadr's thinking that in studying economics must
be seen from two aspects, namely aspects of philosophy of economics or normative economics
and aspects of positive economics. An example of positive economics, i.e. studying the theory
of consumption and demand which is a common and acceptable phenomenon by anyone
without being influenced by idiology. Meanwhile, from the aspect of phylosophy of
economics which is the result of human thought, it will be found that each human group has
an idiology, a perspective that is not the same. An example is the discussion of 'justice'.
According to the concept of classical capitalism, what is meant by fairness is that you get
what you deserve, meaning 'you get what you have worked for'. Meanwhile, according to
classical socialism, the meaning of 'fair' is that no one has previlege to get more than others,
meaning that no one gets facilities to get more than others, in other words, everyone gets the
same. But Islam has its own meaning in interpreting 'fair' which is laa tadhlimuuna wa laa
tudhlamuuna meaning not to harm each other. So according to Baqir As-sadr's school of
thought, there is a difference in principle between economics and Islamic ideology, Therefore,
there will never be a common ground between Islam and economics.
Economics states that economic problems arise because of the problem of scarcity of
economic resources (scarcity) compared to human needs which are unlimited. In this case, the
school of Baqir As-Sadr rejects the understanding of economic science because in Islam it has
been confirmed that Allah Swt. has created creatures in this world including humans in the
sufficiency of economic resources as stated in His word:1
َ
َقَلَخَ
وََ
لُكَََ
فٍَءْيَش-َ
ُهَر دَقَََت-َْ
يِدْق-اًر
"...........................................................
.......... And He has created all things, and He has measured them out with precision."
Furthermore, according to the school of Baqir As-Sadr, the main problem faced by all
human beings in this world is the problem of unequal distribution of wealth. How the gift
given by Allah SWT to all creatures including humans can be distributed evenly and
proportionally. According to the school of Baqir As-Sadr to realize this, there are several
steps taken, namely:
replacing the term economics with the term iqtishad which implies that it is harmonious,
equal, and balanced (in between).
compile and reconstruct a separate economic science derived from the Qur'an and
Assunnah.
This is the contribution of Baqir As-sadr's school which is quite significant in the
discourse of the development of Islamic economics.
Mainstream Mazhab
Islamic economic thought from the mainstream school of thought is what gives the most
color in the discourse of Islamic economics now because most of its figures from the Islamic
Development Bank (IDB) which has funding facilities and cooperation networks with various
international institutions. The figures of the mainstream school include M. Umer Chapra, M.
A. Mannan, Nejatullah Siddiqi, Khurshid Ahmad, Monzer Kahf etc. equilibrium. But
relatively at a certain time and in a certain place there will still be a problem of scarcity. So
until here there is no difference between conventional economics and Islamic economics. The
difference is only in the mechanism of solving economic problems that according to the
mainstream school must refer to the Qur'an and Assunnah. While in the view of classical
capitalism the solution through the operation of the market mechanism, and classical
socialism through a centralized planning system.
Alternative Mazhab
In contrast to the views of the two previous schools, the alternative school sees that
Baqir as-Sadr's school of thought tries to explore and find a new Islamic economic paradigm
by leaving the conventional economic paradigm. While the mainstream school is considered
to be another face of the neoclassical view by eliminating the element of interest and adding
zakat.
The alternative school led by Prof. Timjur Kura (Chair of the Economics Department at
the University of Southern California), Prof. Jomo and Prof. Muhammad Arief contributes
through critical analysis of economics not only on the views of capitalism and socialism but
also criticizes the development of economic discourse. Islamic economic discourse. They
Islam is a view or ideology that is absolute truth that talks about Islamic economics means
studying human thinking about the verses of God and the sunnah of the Prophet in the
economic aspect. So according to this alternative school of Islamic economics is a
discourse that can still be debated because it is a human interpretation of the Qur'an
and Assunnah that needs to be tested and studied continuously.
Actually there is still one more Islamic economic discourse that is also beginning to
develop in the Islamic world, namely the thought of implementing a gold currency system as
a substitute for paper currency. (which was driven by Dr. Umar Vadillo and the Hisbut Tahrir
activist group) as happened / used during the Abbasid reign, namely the dinar and dirham
(gold and silver) currencies.
However, their thoughts cannot be included in a separate school of thought because they
are relative It is still premature and has not been supported by theoretical foundations and
empirical tests in the context of modern life. Moreover, in economic practice in the field it is
over valued so that instead a currency made of copper called "fulus" was created. Ibn
Taymiyah said: "There is no problem with money not coming from gold and silver as long as
the government is able to maintain its value". Al-Maghribi stated: "If the government prints
money continuously, it means that the government does not maintain the value of the
currency". In another section Ibn Qayyim warned: "If the government continuously prints
money, it can cause usury khafi (hidden usury) in the community, namely usury framed by
buying and selling transactions". This is in accordance with the meaning of the Hadith of the
Prophet, namely "There will come a time when people legalize usury by means of buying
and selling".
Muhammad Nejatullah Siddiqi in his book "Reading in Islamic Economic Thought"
explains the history of Islamic economic thought in four phases, namely:
Phase I: 113 H-451 H/731 M- 1058 M.
Phase II: 450 H-850 H / 1058 M-1446 M.
Phase III: 850 H-1350 H / 1446 M-1932 M.
Phase IV: 1932 AD-present.
In the first phase, it is known that there were 15 Muslim economists who actually
contributed to the development of economic thought, while at the same time there were no
economists from mainland Europe. Known at that time figures such as Abu Yusuf,
Muhammad bin Hasan al-Ahaibani, Harist bin Asan al-Muhadibi, Zaid bin Ali Zainal Abidin
bin Hussein bin Ali bin Abi Talib, Junaid Baghdadi, Ibn Miskawaih, Mawardi, etc.
The discourse that developed at that time was macroeconomic thinking concerning
fiscal policy and state finances as reported in Abu Yusuf's book of Al- Kharaj, which is a
book that is written by Abu Yusuf explains the mechanism for imposing taxes on land. Then
also Abu Ubaid in the book Al-Amwal describes how the management of state finances and
the state budget. In the book Al-Ahkam Al-Sulthaniyah by Mawardi discusses more about the
problem of government administration. And by other Islamic economic thinkers have also
been touched on the operation of unfair market mechanisms.
In the second phase of the development of Islamic economic thought, the discourse on
economics intensively began to develop even though on the other hand it was characterized
by changes in the structure of Islamic power which was getting wider. Several major figures
came to the fore such as Imam Al-Ghozali, Ibn Taymiyah, Ibn Khaldun, Ibn Qayyim. In this
second phase, the scientific discourse was directed more towards microeconomic analysis and
the function of money.
Imam Al-Ghozali addressed the issue of money and its functions. According to Imam
Al-Ghazali, it is not a problem to apply a non-gold and silver currency as long as the
government is able to maintain the stability of the currency as a legal tender. In one of his
writings he said "Money is like a mirror, colorless but can reflect all colors" and he also said
"If money has been traded, then it is the same as imprisoning the function of money", so that if
that happens it will cause depreciation of the currency exchange rate against other currencies.
He also explained about the prohibition of usury fadhl and its impact on the economy. Al-
Ghozali's intensive economic studies also touched on the issue of scales, price control (market
intervention), determination of taxes in an emergency, etc. In some parts of his thought also
touches on how the market mechanism works through the power of demand and supply.
(supply) in determining the market equilibrium.
An example of how to overcome the impact of price increases in order to stabilize
market prices is reflected in the government of Umar bin Khatab when there was inflation
caused by crop failure in the Hijaz area as the center of wheat production. The policy applied
by the government at that time to overcome it was through the market mechanism by
increasing the supply of wheat imported from Fuztadz Egypt so that prices returned to normal.
Conversely, if inflation is caused by market distortions such as monopolistic practices
and market hoarding, then the solution applied is not not by using the market mechanism but
through government intervention. Ibn Taymiyah has long suggested that the government
needs to conduct price intervention at the original equilibrium price to break the behavior of
monopolists and hoarding of goods. In contrast to government intervention, the views of
conventional economists suggest that Price fixing is done at the ceiling price or at the floor
price. Then what about the Prophet's hadith regarding the issue of price increases in Medina at
that time, namely "Allah is the one who determines prices. It is Allah who determines
provision and it is Allah who withholds provision". Apparently it was this hadith that later
inspired some economists to conceptualize the operation of the market mechanism by the
invisible hand. If so, is the proposition put forward by Ibn Taymiyyah regarding price
intervention contrary to the intent of the Prophet's hadith above? The answer is no! because
the direction and purpose of government intervention is so that the equilibrium price in the
market returns to the initial equilibrium position (equilibrium).
The third phase was a period of the rise of European civilization. At that time, 22
economists emerged while at the same time there were only a few Muslim scholars, namely
the Shah of Islam waliAllah with his work Hujjah Allah Al-Balighah which explains how the
provisions of sharia in relation to the behavior of an individual and the arrangement of social
organizations, other scholars are Muhammad Iqbal and Jamaluddin Al- Afghani.
We are familiar with the famous European economists such as JS Mill, Alfred Marshal
who formed the classical capitalist school. Behind them came the names of Karl Marx, Lenin
who gave birth to the socialist school. Then came JM Keynes with his Neo Classical school.
In this phase, economic thought from the West really dominated the world until now.
Meanwhile, Muslim scholars continue to experience moral and intellectual decline so that
most Islamic countries become colonies of western countries.
The fourth phase was characterized by the emergence of a new consciousness among
Muslims. A moral and intellectual awakening among Muslims gave birth to several names
such as Sayyid Qutb, Al- Maududi and Yusuf Qardhawi. However, his thoughts are more
inclined to the approach of fiqh, including the work of scientist Abu al- A'la al-Maududi from
Pakistan. It was not until a decade later that scientific works on Islamic economics began to
appear, especially after the first world conference of Muslims in Mecca in 1976 with the main
theme of Islamic economics (Qardhawi, 1997: 20-21).
Like a sleeping person, the study of Islamic economics as a science at the end of the
1970s was like stumbling awake, and this awakening seems to be related to the trends that
occurred in the world due to the economic crisis of 1974, with the birth of what is called the
flow or monetarist thinking, which further consensus Keynesian began to be abandoned
because it was considered no longer able to overcome the problems of contemporary
economics, this tendency is getting stronger after the collapse of Russia's socialist-communist
economy.
From 1980 until now, the awareness of Muslim thought developed quite rapidly, marked
by the emergence of three schools of Muslim thought, namely the Baqir As-Sadr school
(iqtishoduna), the mainstream school and the alternative school. In this phase, several
prominent names emerged such as MA. Mannan, Annas Zarka, Khurshid Ahmad, Nejatullah
Siddiqi, Hasanus Zaman, etc.
From research conducted by Umer Chapra, for example, it can be seen that the capitalist
economic system that relies on market mechanisms has failed to realize its goals, both
positive goals and normative goals.3 Similar failures achieving 'efficient and fair' economic
activity in the process of allocation and distribution of limited resources. While normative
goals are universal goals based on certain norms from all socio-economic aspects such as fair
income distribution, optimal growth rates etc. that are structured based on religious norms
also experienced by the socialist economic system. Actually, the purpose of the socialist
economic system is to correct various problems found in the capitalist economic system, so
that one of the goals of this socialist economic system is the creation of shared prosperity,
where with the implementation of the system there will no longer be various social classes in
society, economic equality occurs, and society will be free from all kinds of tyranny. This
goal turned out to be a failure, because the designers of the system did not understand what
human beings really meant. In this system, people were treated as cogs in a machine called
the state rather than a system built on the spontaneous and voluntary interactions of individual
economic actors.
Therefore, the development of Islamic economics as an alternative system is very
necessary, and with this alternative economic system the goal of economic activity to achieve
maqosidus shar'iah, which is an effort to improve the quality of economic activity to improve
the welfare of all human beings can be realized. The religious moral element is thus part of
the Islamic economic theory itself, and the Islamic economic mechanism to achieve prosperity
efficiently is built through the values of justice, equity and the development of the fiscal
sector in encouraging economic dynamics.
Conclusion
The above quote shows that Islamic economic thought in classical times was very
advanced and developed before Western scientists discussed it in the 18th-19th centuries. This
fact must be considered by contemporary economists, not only Muslim economists but also
non-Muslim economists around the world. Contribution of Islamic Economics to Modern
Economics In the past three decades, the study and research of Islamic economics has
flourished again. Various international forums on Islamic economics have been held
frequently and widely in various countries, such as conferences seminars, symposiums and
workshops. Dozens of doctors and professors of Islamic economics who are experts in both
conventional and shari'ah economics, appear as speakers in these forums. From their study,
they found that Islamic economic theory is actually not a new science or a science that is
fundamentally derived from modern economic theory that is developing today. Historical
facts show that classical Islamic scientists are the inventors and founders of all scientific
fields, including economics.
Circumstances in each period
There were several circumstances that resulted in the period of khulafa' al- rashidun not
many economists were born, including (1) Al Quran and al Hadith become the main source in
running people's lives. (2) The dominance of policy is more influenced by the attitude of the
leader as a representation of the successor to the Prophet Muhammad. This makes the caliph's
decision a reference in carrying out activities in the social field. (3) The scientific capacity of
each caliph is not the same, the period of leadership of the caliph is relatively different and the
end of his power 3 caliphs ended in political tragedy;. Abu Bakar's caliphate lasted for 2
years, 3 months, 11 days. Umar bin Khattab held the caliphate for 10 years, 6 months, 5 days.
Usman bin Affan ruled for 12 years less 12 days, and Ali bin Abi Talib ruled for 5 years and 3
months (Ahmad, 2000:12). (4) There has not been much friction thought with the Byzantine
(Greek) and Sasanian (Persian) scientific mainstream, because the mastery of Greece and
Persia has not yet reached the process of assimilating scientific potential (see Hodgson, 1999:
287).
While there were not many Muslim thinkers in the field of economics during the
Ummayah dynasty due to, among others; (1) The leader's busyness in expanding new
territories which was quite labor and time consuming. (2) The government system tended to
be Arab-centric, the Arab style was very dominant in the bureaucratic system during the
Ummayah dynasty. Non-Arabs - consisting of Persian descendants - commonly called mawali
were treated as second-class citizens. This situation affected the dialectic between the
bureaucracy and the Persians, in fact, as the more educated people were not so good. (3)
Geographically, Damascus, the capital of the Ummayah dynasty consisted mostly of Arabs, so
it was far from the interaction of the outside world, in contrast to Bagdad, the capital of the
Abbasid dynasty, which was close to Cteshipon, the former capital of the Sassanid empire,
Persia. (see Saefudin, 2002: 30-31)
While progress Islamic thought at period dynasty Abbasid dynasty was caused by; (1)
The contact between Islam and Persia became the development of science and philosophy
because Persia culturally played a major role in the development of the Greek scientific
tradition. (2) There was a great deal of activity in translating Greek literature into Arabic.
According to Mehdi Nakosteen, the translation movement was influenced by the previous
translation movement carried out during the Sassanid Empire, which was centered at the
Jundishapur Academy. This academy was the center for translating Greek and Hindu works of
science and philosophy into Pahlavi. From this school also came some important translations
from Sanskrit, Pahlavi and Syriac into Arabic. (Nakosteen, 1964:33) (3) The relative absence
of territorial clearances and rebellions ensured the stability of the government so that the
government's concentration on promoting intellectual aspects found opportunities. (4) The
existence of heterogeneous civilizations and cultures in Baghdad led to a process of
interaction between one culture and another; Arab, Greek, Persian, and Hindu which had an
impact on intellectual development. Bagdad was also inhabited by the rest of the population
native Chaldaeans and Suryani. (5) Bagdad was considered strategic and profitable because it
was passed by the Tigris and Euphrates rivers. (Saefuddin, 2002: 149) Goods can go in and
out through the river using boats so that Bagdad becomes a bustling economic satellite with
commodities being traded.
Then, the science of economics during the Ummayah or Abbasid era is certainly not as
familiar today. From the above historical developments we can note that (1) Economics is an
integral part of the political, social and cultural life of Islamic society so that economic
thought in the work of Muslim thinkers is difficult to separate from political and cultural
thought. This can be proven by the number of books written by Muslim thinkers who unite
economic problems with social, political and cultural problems. (2) Muslim thinkers are
known as Muslim economists because they have documented works through written works
that can be accessed by generations after him, and or known because there are students of the
Muslim thinker who documented his economic his economic thought. (3) Every Muslim
thinker expresses economic or social, political and cultural issues influenced by the
background of each Muslim thinker's life; residence, country, occupation and others.
The development of Muslim economic thought in Europe
The development of knowledge in the Islamic world influenced the progress of thought
in the European world. The influence to Europe is through several ways as follows:
Travels.
During the 11th and early centuries 12 Several Latin-Scholastic European scholars traveled in
several Arab countries to learn Arabic in order to gain knowledge to bring back to Europe.
During this period many students from Italy, Spain and Southern France attended Muslim
studies to learn mathematics, philosophy, medicine, cosmography, and mathematics other
studies in order to be able to teach in Western universities-which were established after the
studies in the Muslim world (Sharif, 1966:1367).
Translation.
From the 11th to the 14th century, there was a great deal of translation from Arabic to
Latin, not only of Arabic writing, but from Arabic to Hebrew. This was done in Spain, Italy
and France. Some notable translators are known from medieval history such as Adelard of
Bath, Constantine the African, Michael the Sct, Herman the German, Dominic Gundisilavi,
John of Seville, Plato of Trivoli, William of Luna, Gerard of Cremona, and Aflred of Sareshel
(Durant, 1950:910) According to Crombie during the Middle Ages, the translation of Arabic
into Latin was a major undertaking 14th and 15th centuries, Scholastic Europe was also not
directly influenced by the legacy of European thinkers, they still used the knowledge of
Muslim thinkers (see Crombie, 1963: 30).
Oral Tradition
Other important influential sources in the oral tradition are insufficiently available.
According to Chejne that specifically for Oral tradition is an important factor, and this is
evidenced by the literary relationship between the Arabs and the West. According to Chejne,
oral transmission took place over a long period of time and relations were maintained between
Muslims and Christians by being bilingual in Spanish. (see Chejne, 1980:111)
Trade
Some authors point out that trade brought the Arab world through Russian roads to
Polania, the Baltic, Scadinavia, central-western Europe and Iceland. Through trade resulting
in the spread of economic institutions, Arab money was used in the Christian Kingdom of the
North, where there had been no coins for 400 years. (see Hitti, 1943:144)
Diffusion and Institutions
Udovich reports that by the 15th century, there were already various contracts of trust
and partnership between Venetians and Arab merchants in Alexandria. These contractual
forms originated in the Islamic world and eventually spread in Latin Europe through contact
with Muslim scholars and scholars legal experts. Then, the emergence of various forms of
instruments and institutions facilitating the development of commerce and trade in Europe,
such as bills of exchange (siftajah), letters of credit (hawala), specialized trading centers
(funduq) and private banks (ma'una) (see Kramers, 1934:102).
Crusades
The crusades that took place from 1092 to 1292 were a long time for Europe to use to
gain knowledge from the Islamic world. According to Ferruollo, during this period the
Muslim community helped shape European attitudes, feelings and values (see Ferruollo,
1984: 42).
Why Europeans do not recognize that Islamic science is big enough to influence the
development of science in Europe, because (1) Europe in medieval times was known to be
very hostile to the Islamic world. This made it difficult for Europeans to accept the
advantages that had been obtained by the Muslim community (Ghanzanfar, 2002:153); and
(2) Scholars at that time borrowing without telling was a common practice, besides property
rights in the 12th century were not yet recognized. In this regard, the Spanish-era priest of the
Domician order, Raymund Martin - who influenced St. Thomas Aquinas - is known to have
sourced his book Pugio Fidei from al Ghazali's Tahafut al-Falasifa, Maqasid ul-Falasifa, al-
Munqid, Mishkat ul-Anwar, and Ihya Ulumuddin, without citing the references (see Sharif,
1966: 1361)).
If traced further, let alone listen back to how the development of Muslim thought about
Islamic economics that already exists (the author described above) which can be traced since
the life of the Prophet Muhammad SAW. Adam Smith was named the father of modern
economics along with the launch of economic thought in a book entitled 'An Inquiry into the
nature causes the wealth of nations'. From Smith's thought, a tradition of scientific thought
was born Classical economics emphasizes the freedom of market mechanisms in measuring
economic activity (laises faire) without being disturbed by government policies.
Adam Smith gave an example of an economically backward society is the Indians in
North America. While an example of an advanced economic society is the Arabs. The Arabs
Adam Smith meant were certainly a nation of traders in the days of the Prophet. Because in
the next explanation he said that the nation led by Muhammad and the generations after him.
From Adam Smith's explanation, it is clear that he recognized the superiority and
greatness of the Muslim economy in the past. Therefore, it is likely that he has indirectly
adopted Islamic economic theories. The indication shows that the progress of the Islamic
economy in medieval times was felt in England, Adam Smith's homeland, even long before he
was born. In 774 AD, King Offa in England at that time minted gold coins which were a
direct copy of the Islamic dinar, including its Arabic writing. All The writing on the coin is
Arabic, except on one side it says OFFAREX.
This reality shows that the Islamic dinar was then the strongest currency in the world. In
addition, the Muslim economy was far more advanced than Europe. It showed that Muslim
international trade had reached as far as Northern Europe. In 1764, Adam Smith gave up his
professorship in Glasgow England and chose his new career as economic advisor to the Duke
of Buccleuch. It was during this period that Smith traveled extensively abroad, especially to
France. Here he met many famous philosophers. Smith began writing The Wealth of Nations
while he was in France and completed it in 1766, in Kirdcaldy. And ten years later it was
published, namely in 1776. At that time in Europe there were already translated books by
Muslim economists. In fact, in the South of France, many professors were applying the
teaching patterns they had learned from Muslim countries. The explanation above shows that
the role of Muslim scientists is very significant to the rise of European intellectualism,
including in economic thought.
In the next development of classical economic thought was not always able to solve all
the economic problems that are growing increasingly complex, one proof is the emergence of
a severe depression of the world economy ahead of World War II (malaise period). From here
then inspired the birth of economic thought that emphasizes the need for the role of
government in regulating economic activity. This thinking was pioneered by John Maynard
Keynes who is considered a modern economic figure who developed the idea of short-term
economic analysis to encourage economic growth and overcome the problems of
unemployment and inflation.
Contemporary Islamic economic thought can be categorized into three groups of schools
of thought, namely:
Baqir As-Sadr's School
Mainstream Mazhab
Alternative Mazhab
Baqir As-Sadr's School
Scholars who became pioneers of this school are Baqir as- Sadr and Ali Shariati and
scholars from Iran and Iraq. According to As-Sadr's thinking that in studying economics must
be seen from two aspects, namely aspects of philosophy of economics or normative economics
and aspects of positive economics. An example of positive economics, i.e. studying the theory
of consumption and demand which is a common and acceptable phenomenon by anyone
without being influenced by idiology. Meanwhile, from the aspect of phylosophy of
economics which is the result of human thought, it will be found that each human group has
an idiology, a perspective that is not the same. An example is the discussion of 'justice'.
According to the concept of classical capitalism, what is meant by fairness is that you get
what you deserve, meaning 'you get what you have worked for'. Meanwhile, according to
classical socialism, the meaning of 'fair' is that no one has previlege to get more than others,
meaning that no one gets facilities to get more than others, in other words, everyone gets the
same. But Islam has its own meaning in interpreting 'fair' which is laa tadhlimuuna wa laa
tudhlamuuna meaning not to harm each other. So according to Baqir As-sadr's school of
thought, there is a difference in principle between economics and Islamic ideology, Therefore,
there will never be a common ground between Islam and economics.
Economics states that economic problems arise because of the problem of scarcity of
economic resources (scarcity) compared to human needs which are unlimited. In this case, the
school of Baqir As-Sadr rejects the understanding of economic science because in Islam it has
been confirmed that Allah Swt. has created creatures in this world including humans in the
sufficiency of economic resources as stated in His word:1
َ
َقَلَخَ
وََ
لُكَََ
فٍَءْيَش-َ
ُهَر دَقَََت-َْ
يِدْق-اًر
"...........................................................
.......... And He has created all things, and He has measured them out with precision."
Furthermore, according to the school of Baqir As-Sadr, the main problem faced by all
human beings in this world is the problem of unequal distribution of wealth. How the gift
given by Allah SWT to all creatures including humans can be distributed evenly and
proportionally. According to the school of Baqir As-Sadr to realize this, there are several
steps taken, namely:
replacing the term economics with the term iqtishad which implies that it is harmonious,
equal, and balanced (in between).
compile and reconstruct a separate economic science derived from the Qur'an and
Assunnah.
This is the contribution of Baqir As-sadr's school which is quite significant in the
discourse of the development of Islamic economics.
Mainstream Mazhab
Islamic economic thought from the mainstream school of thought is what gives the most
color in the discourse of Islamic economics now because most of its figures from the Islamic
Development Bank (IDB) which has funding facilities and cooperation networks with various
international institutions. The figures of the mainstream school include M. Umer Chapra, M.
A. Mannan, Nejatullah Siddiqi, Khurshid Ahmad, Monzer Kahf etc. equilibrium. But
relatively at a certain time and in a certain place there will still be a problem of scarcity. So
until here there is no difference between conventional economics and Islamic economics. The
difference is only in the mechanism of solving economic problems that according to the
mainstream school must refer to the Qur'an and Assunnah. While in the view of classical
capitalism the solution through the operation of the market mechanism, and classical
socialism through a centralized planning system.
Alternative Mazhab
In contrast to the views of the two previous schools, the alternative school sees that
Baqir as-Sadr's school of thought tries to explore and find a new Islamic economic paradigm
by leaving the conventional economic paradigm. While the mainstream school is considered
to be another face of the neoclassical view by eliminating the element of interest and adding
zakat.
The alternative school led by Prof. Timjur Kura (Chair of the Economics Department at
the University of Southern California), Prof. Jomo and Prof. Muhammad Arief contributes
through critical analysis of economics not only on the views of capitalism and socialism but
also criticizes the development of economic discourse. Islamic economic discourse. They
Islam is a view or ideology that is absolute truth that talks about Islamic economics means
studying human thinking about the verses of God and the sunnah of the Prophet in the
economic aspect. So according to this alternative school of Islamic economics is a
discourse that can still be debated because it is a human interpretation of the Qur'an
and Assunnah that needs to be tested and studied continuously.
Actually there is still one more Islamic economic discourse that is also beginning to
develop in the Islamic world, namely the thought of implementing a gold currency system as
a substitute for paper currency. (which was driven by Dr. Umar Vadillo and the Hisbut Tahrir
activist group) as happened / used during the Abbasid reign, namely the dinar and dirham
(gold and silver) currencies.
However, their thoughts cannot be included in a separate school of thought because they
are relative It is still premature and has not been supported by theoretical foundations and
empirical tests in the context of modern life. Moreover, in economic practice in the field it is
over valued so that instead a currency made of copper called "fulus" was created. Ibn
Taymiyah said: "There is no problem with money not coming from gold and silver as long as
the government is able to maintain its value". Al-Maghribi stated: "If the government prints
money continuously, it means that the government does not maintain the value of the
currency". In another section Ibn Qayyim warned: "If the government continuously prints
money, it can cause usury khafi (hidden usury) in the community, namely usury framed by
buying and selling transactions". This is in accordance with the meaning of the Hadith of the
Prophet, namely "There will come a time when people legalize usury by means of buying
and selling".
Muhammad Nejatullah Siddiqi in his book "Reading in Islamic Economic Thought"
explains the history of Islamic economic thought in four phases, namely:
Phase I: 113 H-451 H/731 M- 1058 M.
Phase II: 450 H-850 H / 1058 M-1446 M.
Phase III: 850 H-1350 H / 1446 M-1932 M.
Phase IV: 1932 AD-present.
In the first phase, it is known that there were 15 Muslim economists who actually
contributed to the development of economic thought, while at the same time there were no
economists from mainland Europe. Known at that time figures such as Abu Yusuf,
Muhammad bin Hasan al-Ahaibani, Harist bin Asan al-Muhadibi, Zaid bin Ali Zainal Abidin
bin Hussein bin Ali bin Abi Talib, Junaid Baghdadi, Ibn Miskawaih, Mawardi, etc.
The discourse that developed at that time was macroeconomic thinking concerning
fiscal policy and state finances as reported in Abu Yusuf's book of Al- Kharaj, which is a
book that is written by Abu Yusuf explains the mechanism for imposing taxes on land. Then
also Abu Ubaid in the book Al-Amwal describes how the management of state finances and
the state budget. In the book Al-Ahkam Al-Sulthaniyah by Mawardi discusses more about the
problem of government administration. And by other Islamic economic thinkers have also
been touched on the operation of unfair market mechanisms.
In the second phase of the development of Islamic economic thought, the discourse on
economics intensively began to develop even though on the other hand it was characterized
by changes in the structure of Islamic power which was getting wider. Several major figures
came to the fore such as Imam Al-Ghozali, Ibn Taymiyah, Ibn Khaldun, Ibn Qayyim. In this
second phase, the scientific discourse was directed more towards microeconomic analysis and
the function of money.
Imam Al-Ghozali addressed the issue of money and its functions. According to Imam
Al-Ghazali, it is not a problem to apply a non-gold and silver currency as long as the
government is able to maintain the stability of the currency as a legal tender. In one of his
writings he said "Money is like a mirror, colorless but can reflect all colors" and he also said
"If money has been traded, then it is the same as imprisoning the function of money", so that if
that happens it will cause depreciation of the currency exchange rate against other currencies.
He also explained about the prohibition of usury fadhl and its impact on the economy. Al-
Ghozali's intensive economic studies also touched on the issue of scales, price control (market
intervention), determination of taxes in an emergency, etc. In some parts of his thought also
touches on how the market mechanism works through the power of demand and supply.
(supply) in determining the market equilibrium.
An example of how to overcome the impact of price increases in order to stabilize
market prices is reflected in the government of Umar bin Khatab when there was inflation
caused by crop failure in the Hijaz area as the center of wheat production. The policy applied
by the government at that time to overcome it was through the market mechanism by
increasing the supply of wheat imported from Fuztadz Egypt so that prices returned to normal.
Conversely, if inflation is caused by market distortions such as monopolistic practices
and market hoarding, then the solution applied is not not by using the market mechanism but
through government intervention. Ibn Taymiyah has long suggested that the government
needs to conduct price intervention at the original equilibrium price to break the behavior of
monopolists and hoarding of goods. In contrast to government intervention, the views of
conventional economists suggest that Price fixing is done at the ceiling price or at the floor
price. Then what about the Prophet's hadith regarding the issue of price increases in Medina at
that time, namely "Allah is the one who determines prices. It is Allah who determines
provision and it is Allah who withholds provision". Apparently it was this hadith that later
inspired some economists to conceptualize the operation of the market mechanism by the
invisible hand. If so, is the proposition put forward by Ibn Taymiyyah regarding price
intervention contrary to the intent of the Prophet's hadith above? The answer is no! because
the direction and purpose of government intervention is so that the equilibrium price in the
market returns to the initial equilibrium position (equilibrium).
The third phase was a period of the rise of European civilization. At that time, 22
economists emerged while at the same time there were only a few Muslim scholars, namely
the Shah of Islam waliAllah with his work Hujjah Allah Al-Balighah which explains how the
provisions of sharia in relation to the behavior of an individual and the arrangement of social
organizations, other scholars are Muhammad Iqbal and Jamaluddin Al- Afghani.
We are familiar with the famous European economists such as JS Mill, Alfred Marshal
who formed the classical capitalist school. Behind them came the names of Karl Marx, Lenin
who gave birth to the socialist school. Then came JM Keynes with his Neo Classical school.
In this phase, economic thought from the West really dominated the world until now.
Meanwhile, Muslim scholars continue to experience moral and intellectual decline so that
most Islamic countries become colonies of western countries.
The fourth phase was characterized by the emergence of a new consciousness among
Muslims. A moral and intellectual awakening among Muslims gave birth to several names
such as Sayyid Qutb, Al- Maududi and Yusuf Qardhawi. However, his thoughts are more
inclined to the approach of fiqh, including the work of scientist Abu al- A'la al-Maududi from
Pakistan. It was not until a decade later that scientific works on Islamic economics began to
appear, especially after the first world conference of Muslims in Mecca in 1976 with the main
theme of Islamic economics (Qardhawi, 1997: 20-21).
Like a sleeping person, the study of Islamic economics as a science at the end of the
1970s was like stumbling awake, and this awakening seems to be related to the trends that
occurred in the world due to the economic crisis of 1974, with the birth of what is called the
flow or monetarist thinking, which further consensus Keynesian began to be abandoned
because it was considered no longer able to overcome the problems of contemporary
economics, this tendency is getting stronger after the collapse of Russia's socialist-communist
economy.
From 1980 until now, the awareness of Muslim thought developed quite rapidly, marked
by the emergence of three schools of Muslim thought, namely the Baqir As-Sadr school
(iqtishoduna), the mainstream school and the alternative school. In this phase, several
prominent names emerged such as MA. Mannan, Annas Zarka, Khurshid Ahmad, Nejatullah
Siddiqi, Hasanus Zaman, etc.
From research conducted by Umer Chapra, for example, it can be seen that the capitalist
economic system that relies on market mechanisms has failed to realize its goals, both
positive goals and normative goals.3 Similar failures achieving 'efficient and fair' economic
activity in the process of allocation and distribution of limited resources. While normative
goals are universal goals based on certain norms from all socio-economic aspects such as fair
income distribution, optimal growth rates etc. that are structured based on religious norms
also experienced by the socialist economic system. Actually, the purpose of the socialist
economic system is to correct various problems found in the capitalist economic system, so
that one of the goals of this socialist economic system is the creation of shared prosperity,
where with the implementation of the system there will no longer be various social classes in
society, economic equality occurs, and society will be free from all kinds of tyranny. This
goal turned out to be a failure, because the designers of the system did not understand what
human beings really meant. In this system, people were treated as cogs in a machine called
the state rather than a system built on the spontaneous and voluntary interactions of individual
economic actors.
Therefore, the development of Islamic economics as an alternative system is very
necessary, and with this alternative economic system the goal of economic activity to achieve
maqosidus shar'iah, which is an effort to improve the quality of economic activity to improve
the welfare of all human beings can be realized. The religious moral element is thus part of
the Islamic economic theory itself, and the Islamic economic mechanism to achieve prosperity
efficiently is built through the values of justice, equity and the development of the fiscal
sector in encouraging economic dynamics.
Conclusion
The above quote shows that Islamic economic thought in classical times was very
advanced and developed before Western scientists discussed it in the 18th-19th centuries. This
fact must be considered by contemporary economists, not only Muslim economists but also
non-Muslim economists around the world. Contribution of Islamic Economics to Modern
Economics In the past three decades, the study and research of Islamic economics has
flourished again. Various international forums on Islamic economics have been held
frequently and widely in various countries, such as conferences seminars, symposiums and
workshops. Dozens of doctors and professors of Islamic economics who are experts in both
conventional and shari'ah economics, appear as speakers in these forums. From their study,
they found that Islamic economic theory is actually not a new science or a science that is
fundamentally derived from modern economic theory that is developing today. Historical
facts show that classical Islamic scientists are the inventors and founders of all scientific
fields, including economics.
Circumstances in each period
There were several circumstances that resulted in the period of khulafa' al- rashidun not
many economists were born, including (1) Al Quran and al Hadith become the main source in
running people's lives. (2) The dominance of policy is more influenced by the attitude of the
leader as a representation of the successor to the Prophet Muhammad. This makes the caliph's
decision a reference in carrying out activities in the social field. (3) The scientific capacity of
each caliph is not the same, the period of leadership of the caliph is relatively different and the
end of his power 3 caliphs ended in political tragedy;. Abu Bakar's caliphate lasted for 2
years, 3 months, 11 days. Umar bin Khattab held the caliphate for 10 years, 6 months, 5 days.
Usman bin Affan ruled for 12 years less 12 days, and Ali bin Abi Talib ruled for 5 years and 3
months (Ahmad, 2000:12). (4) There has not been much friction thought with the Byzantine
(Greek) and Sasanian (Persian) scientific mainstream, because the mastery of Greece and
Persia has not yet reached the process of assimilating scientific potential (see Hodgson, 1999:
287).
While there were not many Muslim thinkers in the field of economics during the
Ummayah dynasty due to, among others; (1) The leader's busyness in expanding new
territories which was quite labor and time consuming. (2) The government system tended to
be Arab-centric, the Arab style was very dominant in the bureaucratic system during the
Ummayah dynasty. Non-Arabs - consisting of Persian descendants - commonly called mawali
were treated as second-class citizens. This situation affected the dialectic between the
bureaucracy and the Persians, in fact, as the more educated people were not so good. (3)
Geographically, Damascus, the capital of the Ummayah dynasty consisted mostly of Arabs, so
it was far from the interaction of the outside world, in contrast to Bagdad, the capital of the
Abbasid dynasty, which was close to Cteshipon, the former capital of the Sassanid empire,
Persia. (see Saefudin, 2002: 30-31)
While progress Islamic thought at period dynasty Abbasid dynasty was caused by; (1)
The contact between Islam and Persia became the development of science and philosophy
because Persia culturally played a major role in the development of the Greek scientific
tradition. (2) There was a great deal of activity in translating Greek literature into Arabic.
According to Mehdi Nakosteen, the translation movement was influenced by the previous
translation movement carried out during the Sassanid Empire, which was centered at the
Jundishapur Academy. This academy was the center for translating Greek and Hindu works of
science and philosophy into Pahlavi. From this school also came some important translations
from Sanskrit, Pahlavi and Syriac into Arabic. (Nakosteen, 1964:33) (3) The relative absence
of territorial clearances and rebellions ensured the stability of the government so that the
government's concentration on promoting intellectual aspects found opportunities. (4) The
existence of heterogeneous civilizations and cultures in Baghdad led to a process of
interaction between one culture and another; Arab, Greek, Persian, and Hindu which had an
impact on intellectual development. Bagdad was also inhabited by the rest of the population
native Chaldaeans and Suryani. (5) Bagdad was considered strategic and profitable because it
was passed by the Tigris and Euphrates rivers. (Saefuddin, 2002: 149) Goods can go in and
out through the river using boats so that Bagdad becomes a bustling economic satellite with
commodities being traded.
Then, the science of economics during the Ummayah or Abbasid era is certainly not as
familiar today. From the above historical developments we can note that (1) Economics is an
integral part of the political, social and cultural life of Islamic society so that economic
thought in the work of Muslim thinkers is difficult to separate from political and cultural
thought. This can be proven by the number of books written by Muslim thinkers who unite
economic problems with social, political and cultural problems. (2) Muslim thinkers are
known as Muslim economists because they have documented works through written works
that can be accessed by generations after him, and or known because there are students of the
Muslim thinker who documented his economic his economic thought. (3) Every Muslim
thinker expresses economic or social, political and cultural issues influenced by the
background of each Muslim thinker's life; residence, country, occupation and others.
The development of Muslim economic thought in Europe
The development of knowledge in the Islamic world influenced the progress of thought
in the European world. The influence to Europe is through several ways as follows:
Travels.
During the 11th and early centuries 12 Several Latin-Scholastic European scholars traveled in
several Arab countries to learn Arabic in order to gain knowledge to bring back to Europe.
During this period many students from Italy, Spain and Southern France attended Muslim
studies to learn mathematics, philosophy, medicine, cosmography, and mathematics other
studies in order to be able to teach in Western universities-which were established after the
studies in the Muslim world (Sharif, 1966:1367).
Translation.
From the 11th to the 14th century, there was a great deal of translation from Arabic to
Latin, not only of Arabic writing, but from Arabic to Hebrew. This was done in Spain, Italy
and France. Some notable translators are known from medieval history such as Adelard of
Bath, Constantine the African, Michael the Sct, Herman the German, Dominic Gundisilavi,
John of Seville, Plato of Trivoli, William of Luna, Gerard of Cremona, and Aflred of Sareshel
(Durant, 1950:910) According to Crombie during the Middle Ages, the translation of Arabic
into Latin was a major undertaking 14th and 15th centuries, Scholastic Europe was also not
directly influenced by the legacy of European thinkers, they still used the knowledge of
Muslim thinkers (see Crombie, 1963: 30).
Oral Tradition
Other important influential sources in the oral tradition are insufficiently available.
According to Chejne that specifically for Oral tradition is an important factor, and this is
evidenced by the literary relationship between the Arabs and the West. According to Chejne,
oral transmission took place over a long period of time and relations were maintained between
Muslims and Christians by being bilingual in Spanish. (see Chejne, 1980:111)
Trade
Some authors point out that trade brought the Arab world through Russian roads to
Polania, the Baltic, Scadinavia, central-western Europe and Iceland. Through trade resulting
in the spread of economic institutions, Arab money was used in the Christian Kingdom of the
North, where there had been no coins for 400 years. (see Hitti, 1943:144)
Diffusion and Institutions
Udovich reports that by the 15th century, there were already various contracts of trust
and partnership between Venetians and Arab merchants in Alexandria. These contractual
forms originated in the Islamic world and eventually spread in Latin Europe through contact
with Muslim scholars and scholars legal experts. Then, the emergence of various forms of
instruments and institutions facilitating the development of commerce and trade in Europe,
such as bills of exchange (siftajah), letters of credit (hawala), specialized trading centers
(funduq) and private banks (ma'una) (see Kramers, 1934:102).
Crusades
The crusades that took place from 1092 to 1292 were a long time for Europe to use to
gain knowledge from the Islamic world. According to Ferruollo, during this period the
Muslim community helped shape European attitudes, feelings and values (see Ferruollo,
1984: 42).
Why Europeans do not recognize that Islamic science is big enough to influence the
development of science in Europe, because (1) Europe in medieval times was known to be
very hostile to the Islamic world. This made it difficult for Europeans to accept the
advantages that had been obtained by the Muslim community (Ghanzanfar, 2002:153); and
(2) Scholars at that time borrowing without telling was a common practice, besides property
rights in the 12th century were not yet recognized. In this regard, the Spanish-era priest of the
Domician order, Raymund Martin - who influenced St. Thomas Aquinas - is known to have
sourced his book Pugio Fidei from al Ghazali's Tahafut al-Falasifa, Maqasid ul-Falasifa, al-
Munqid, Mishkat ul-Anwar, and Ihya Ulumuddin, without citing the references (see Sharif,
1966: 1361)).
If traced further, let alone listen back to how the development of Muslim thought about
Islamic economics that already exists (the author described above) which can be traced since
the life of the Prophet Muhammad SAW. Adam Smith was named the father of modern
economics along with the launch of economic thought in a book entitled 'An Inquiry into the
nature causes the wealth of nations'. From Smith's thought, a tradition of scientific thought
was born Classical economics emphasizes the freedom of market mechanisms in measuring
economic activity (laises faire) without being disturbed by government policies.
Adam Smith gave an example of an economically backward society is the Indians in
North America. While an example of an advanced economic society is the Arabs. The Arabs
Adam Smith meant were certainly a nation of traders in the days of the Prophet. Because in
the next explanation he said that the nation led by Muhammad and the generations after him.
From Adam Smith's explanation, it is clear that he recognized the superiority and
greatness of the Muslim economy in the past. Therefore, it is likely that he has indirectly
adopted Islamic economic theories. The indication shows that the progress of the Islamic
economy in medieval times was felt in England, Adam Smith's homeland, even long before he
was born. In 774 AD, King Offa in England at that time minted gold coins which were a
direct copy of the Islamic dinar, including its Arabic writing. All The writing on the coin is
Arabic, except on one side it says OFFAREX.
This reality shows that the Islamic dinar was then the strongest currency in the world. In
addition, the Muslim economy was far more advanced than Europe. It showed that Muslim
international trade had reached as far as Northern Europe. In 1764, Adam Smith gave up his
professorship in Glasgow England and chose his new career as economic advisor to the Duke
of Buccleuch. It was during this period that Smith traveled extensively abroad, especially to
France. Here he met many famous philosophers. Smith began writing The Wealth of Nations
while he was in France and completed it in 1766, in Kirdcaldy. And ten years later it was
published, namely in 1776. At that time in Europe there were already translated books by
Muslim economists. In fact, in the South of France, many professors were applying the
teaching patterns they had learned from Muslim countries. The explanation above shows that
the role of Muslim scientists is very significant to the rise of European intellectualism,
including in economic thought.
In the next development of classical economic thought was not always able to solve all
the economic problems that are growing increasingly complex, one proof is the emergence of
a severe depression of the world economy ahead of World War II (malaise period). From here
then inspired the birth of economic thought that emphasizes the need for the role of
government in regulating economic activity. This thinking was pioneered by John Maynard
Keynes who is considered a modern economic figure who developed the idea of short-term
economic analysis to encourage economic growth and overcome the problems of
unemployment and inflation.
Contemporary Islamic economic thought can be categorized into three groups of schools
of thought, namely:
Baqir As-Sadr's School
Mainstream Mazhab
Alternative Mazhab
Baqir As-Sadr's School
Scholars who became pioneers of this school are Baqir as- Sadr and Ali Shariati and
scholars from Iran and Iraq. According to As-Sadr's thinking that in studying economics must
be seen from two aspects, namely aspects of philosophy of economics or normative economics
and aspects of positive economics. An example of positive economics, i.e. studying the theory
of consumption and demand which is a common and acceptable phenomenon by anyone
without being influenced by idiology. Meanwhile, from the aspect of phylosophy of
economics which is the result of human thought, it will be found that each human group has
an idiology, a perspective that is not the same. An example is the discussion of 'justice'.
According to the concept of classical capitalism, what is meant by fairness is that you get
what you deserve, meaning 'you get what you have worked for'. Meanwhile, according to
classical socialism, the meaning of 'fair' is that no one has previlege to get more than others,
meaning that no one gets facilities to get more than others, in other words, everyone gets the
same. But Islam has its own meaning in interpreting 'fair' which is laa tadhlimuuna wa laa
tudhlamuuna meaning not to harm each other. So according to Baqir As-sadr's school of
thought, there is a difference in principle between economics and Islamic ideology, Therefore,
there will never be a common ground between Islam and economics.
Economics states that economic problems arise because of the problem of scarcity of
economic resources (scarcity) compared to human needs which are unlimited. In this case, the
school of Baqir As-Sadr rejects the understanding of economic science because in Islam it has
been confirmed that Allah Swt. has created creatures in this world including humans in the
sufficiency of economic resources as stated in His word:1
َ
َقَلَخَ
وََ
لُكَََ
فٍَءْيَش-َ
ُهَر دَقَََت-َْ
يِدْق-اًر
"...........................................................
.......... And He has created all things, and He has measured them out with precision."
Furthermore, according to the school of Baqir As-Sadr, the main problem faced by all
human beings in this world is the problem of unequal distribution of wealth. How the gift
given by Allah SWT to all creatures including humans can be distributed evenly and
proportionally. According to the school of Baqir As-Sadr to realize this, there are several
steps taken, namely:
replacing the term economics with the term iqtishad which implies that it is harmonious,
equal, and balanced (in between).
compile and reconstruct a separate economic science derived from the Qur'an and
Assunnah.
This is the contribution of Baqir As-sadr's school which is quite significant in the
discourse of the development of Islamic economics.
Mainstream Mazhab
Islamic economic thought from the mainstream school of thought is what gives the most
color in the discourse of Islamic economics now because most of its figures from the Islamic
Development Bank (IDB) which has funding facilities and cooperation networks with various
international institutions. The figures of the mainstream school include M. Umer Chapra, M.
A. Mannan, Nejatullah Siddiqi, Khurshid Ahmad, Monzer Kahf etc. equilibrium. But
relatively at a certain time and in a certain place there will still be a problem of scarcity. So
until here there is no difference between conventional economics and Islamic economics. The
difference is only in the mechanism of solving economic problems that according to the
mainstream school must refer to the Qur'an and Assunnah. While in the view of classical
capitalism the solution through the operation of the market mechanism, and classical
socialism through a centralized planning system.
Alternative Mazhab
In contrast to the views of the two previous schools, the alternative school sees that
Baqir as-Sadr's school of thought tries to explore and find a new Islamic economic paradigm
by leaving the conventional economic paradigm. While the mainstream school is considered
to be another face of the neoclassical view by eliminating the element of interest and adding
zakat.
The alternative school led by Prof. Timjur Kura (Chair of the Economics Department at
the University of Southern California), Prof. Jomo and Prof. Muhammad Arief contributes
through critical analysis of economics not only on the views of capitalism and socialism but
also criticizes the development of economic discourse. Islamic economic discourse. They
Islam is a view or ideology that is absolute truth that talks about Islamic economics means
studying human thinking about the verses of God and the sunnah of the Prophet in the
economic aspect. So according to this alternative school of Islamic economics is a
discourse that can still be debated because it is a human interpretation of the Qur'an
and Assunnah that needs to be tested and studied continuously.
Actually there is still one more Islamic economic discourse that is also beginning to
develop in the Islamic world, namely the thought of implementing a gold currency system as
a substitute for paper currency. (which was driven by Dr. Umar Vadillo and the Hisbut Tahrir
activist group) as happened / used during the Abbasid reign, namely the dinar and dirham
(gold and silver) currencies.
However, their thoughts cannot be included in a separate school of thought because they
are relative It is still premature and has not been supported by theoretical foundations and
empirical tests in the context of modern life. Moreover, in economic practice in the field it is
over valued so that instead a currency made of copper called "fulus" was created. Ibn
Taymiyah said: "There is no problem with money not coming from gold and silver as long as
the government is able to maintain its value". Al-Maghribi stated: "If the government prints
money continuously, it means that the government does not maintain the value of the
currency". In another section Ibn Qayyim warned: "If the government continuously prints
money, it can cause usury khafi (hidden usury) in the community, namely usury framed by
buying and selling transactions". This is in accordance with the meaning of the Hadith of the
Prophet, namely "There will come a time when people legalize usury by means of buying
and selling".
Muhammad Nejatullah Siddiqi in his book "Reading in Islamic Economic Thought"
explains the history of Islamic economic thought in four phases, namely:
Phase I: 113 H-451 H/731 M- 1058 M.
Phase II: 450 H-850 H / 1058 M-1446 M.
Phase III: 850 H-1350 H / 1446 M-1932 M.
Phase IV: 1932 AD-present.
In the first phase, it is known that there were 15 Muslim economists who actually
contributed to the development of economic thought, while at the same time there were no
economists from mainland Europe. Known at that time figures such as Abu Yusuf,
Muhammad bin Hasan al-Ahaibani, Harist bin Asan al-Muhadibi, Zaid bin Ali Zainal Abidin
bin Hussein bin Ali bin Abi Talib, Junaid Baghdadi, Ibn Miskawaih, Mawardi, etc.
The discourse that developed at that time was macroeconomic thinking concerning
fiscal policy and state finances as reported in Abu Yusuf's book of Al- Kharaj, which is a
book that is written by Abu Yusuf explains the mechanism for imposing taxes on land. Then
also Abu Ubaid in the book Al-Amwal describes how the management of state finances and
the state budget. In the book Al-Ahkam Al-Sulthaniyah by Mawardi discusses more about the
problem of government administration. And by other Islamic economic thinkers have also
been touched on the operation of unfair market mechanisms.
In the second phase of the development of Islamic economic thought, the discourse on
economics intensively began to develop even though on the other hand it was characterized
by changes in the structure of Islamic power which was getting wider. Several major figures
came to the fore such as Imam Al-Ghozali, Ibn Taymiyah, Ibn Khaldun, Ibn Qayyim. In this
second phase, the scientific discourse was directed more towards microeconomic analysis and
the function of money.
Imam Al-Ghozali addressed the issue of money and its functions. According to Imam
Al-Ghazali, it is not a problem to apply a non-gold and silver currency as long as the
government is able to maintain the stability of the currency as a legal tender. In one of his
writings he said "Money is like a mirror, colorless but can reflect all colors" and he also said
"If money has been traded, then it is the same as imprisoning the function of money", so that if
that happens it will cause depreciation of the currency exchange rate against other currencies.
He also explained about the prohibition of usury fadhl and its impact on the economy. Al-
Ghozali's intensive economic studies also touched on the issue of scales, price control (market
intervention), determination of taxes in an emergency, etc. In some parts of his thought also
touches on how the market mechanism works through the power of demand and supply.
(supply) in determining the market equilibrium.
An example of how to overcome the impact of price increases in order to stabilize
market prices is reflected in the government of Umar bin Khatab when there was inflation
caused by crop failure in the Hijaz area as the center of wheat production. The policy applied
by the government at that time to overcome it was through the market mechanism by
increasing the supply of wheat imported from Fuztadz Egypt so that prices returned to normal.
Conversely, if inflation is caused by market distortions such as monopolistic practices
and market hoarding, then the solution applied is not not by using the market mechanism but
through government intervention. Ibn Taymiyah has long suggested that the government
needs to conduct price intervention at the original equilibrium price to break the behavior of
monopolists and hoarding of goods. In contrast to government intervention, the views of
conventional economists suggest that Price fixing is done at the ceiling price or at the floor
price. Then what about the Prophet's hadith regarding the issue of price increases in Medina at
that time, namely "Allah is the one who determines prices. It is Allah who determines
provision and it is Allah who withholds provision". Apparently it was this hadith that later
inspired some economists to conceptualize the operation of the market mechanism by the
invisible hand. If so, is the proposition put forward by Ibn Taymiyyah regarding price
intervention contrary to the intent of the Prophet's hadith above? The answer is no! because
the direction and purpose of government intervention is so that the equilibrium price in the
market returns to the initial equilibrium position (equilibrium).
The third phase was a period of the rise of European civilization. At that time, 22
economists emerged while at the same time there were only a few Muslim scholars, namely
the Shah of Islam waliAllah with his work Hujjah Allah Al-Balighah which explains how the
provisions of sharia in relation to the behavior of an individual and the arrangement of social
organizations, other scholars are Muhammad Iqbal and Jamaluddin Al- Afghani.
We are familiar with the famous European economists such as JS Mill, Alfred Marshal
who formed the classical capitalist school. Behind them came the names of Karl Marx, Lenin
who gave birth to the socialist school. Then came JM Keynes with his Neo Classical school.
In this phase, economic thought from the West really dominated the world until now.
Meanwhile, Muslim scholars continue to experience moral and intellectual decline so that
most Islamic countries become colonies of western countries.
The fourth phase was characterized by the emergence of a new consciousness among
Muslims. A moral and intellectual awakening among Muslims gave birth to several names
such as Sayyid Qutb, Al- Maududi and Yusuf Qardhawi. However, his thoughts are more
inclined to the approach of fiqh, including the work of scientist Abu al- A'la al-Maududi from
Pakistan. It was not until a decade later that scientific works on Islamic economics began to
appear, especially after the first world conference of Muslims in Mecca in 1976 with the main
theme of Islamic economics (Qardhawi, 1997: 20-21).
Like a sleeping person, the study of Islamic economics as a science at the end of the
1970s was like stumbling awake, and this awakening seems to be related to the trends that
occurred in the world due to the economic crisis of 1974, with the birth of what is called the
flow or monetarist thinking, which further consensus Keynesian began to be abandoned
because it was considered no longer able to overcome the problems of contemporary
economics, this tendency is getting stronger after the collapse of Russia's socialist-communist
economy.
From 1980 until now, the awareness of Muslim thought developed quite rapidly, marked
by the emergence of three schools of Muslim thought, namely the Baqir As-Sadr school
(iqtishoduna), the mainstream school and the alternative school. In this phase, several
prominent names emerged such as MA. Mannan, Annas Zarka, Khurshid Ahmad, Nejatullah
Siddiqi, Hasanus Zaman, etc.
From research conducted by Umer Chapra, for example, it can be seen that the capitalist
economic system that relies on market mechanisms has failed to realize its goals, both
positive goals and normative goals.3 Similar failures achieving 'efficient and fair' economic
activity in the process of allocation and distribution of limited resources. While normative
goals are universal goals based on certain norms from all socio-economic aspects such as fair
income distribution, optimal growth rates etc. that are structured based on religious norms
also experienced by the socialist economic system. Actually, the purpose of the socialist
economic system is to correct various problems found in the capitalist economic system, so
that one of the goals of this socialist economic system is the creation of shared prosperity,
where with the implementation of the system there will no longer be various social classes in
society, economic equality occurs, and society will be free from all kinds of tyranny. This
goal turned out to be a failure, because the designers of the system did not understand what
human beings really meant. In this system, people were treated as cogs in a machine called
the state rather than a system built on the spontaneous and voluntary interactions of individual
economic actors.
Therefore, the development of Islamic economics as an alternative system is very
necessary, and with this alternative economic system the goal of economic activity to achieve
maqosidus shar'iah, which is an effort to improve the quality of economic activity to improve
the welfare of all human beings can be realized. The religious moral element is thus part of
the Islamic economic theory itself, and the Islamic economic mechanism to achieve prosperity
efficiently is built through the values of justice, equity and the development of the fiscal
sector in encouraging economic dynamics.
Conclusion
The above quote shows that Islamic economic thought in classical times was very
advanced and developed before Western scientists discussed it in the 18th-19th centuries. This
fact must be considered by contemporary economists, not only Muslim economists but also
non-Muslim economists around the world. Contribution of Islamic Economics to Modern
Economics In the past three decades, the study and research of Islamic economics has
flourished again. Various international forums on Islamic economics have been held
frequently and widely in various countries, such as conferences seminars, symposiums and
workshops. Dozens of doctors and professors of Islamic economics who are experts in both
conventional and shari'ah economics, appear as speakers in these forums. From their study,
they found that Islamic economic theory is actually not a new science or a science that is
fundamentally derived from modern economic theory that is developing today. Historical
facts show that classical Islamic scientists are the inventors and founders of all scientific
fields, including economics.
Circumstances in each period
There were several circumstances that resulted in the period of khulafa' al- rashidun not
many economists were born, including (1) Al Quran and al Hadith become the main source in
running people's lives. (2) The dominance of policy is more influenced by the attitude of the
leader as a representation of the successor to the Prophet Muhammad. This makes the caliph's
decision a reference in carrying out activities in the social field. (3) The scientific capacity of
each caliph is not the same, the period of leadership of the caliph is relatively different and the
end of his power 3 caliphs ended in political tragedy;. Abu Bakar's caliphate lasted for 2
years, 3 months, 11 days. Umar bin Khattab held the caliphate for 10 years, 6 months, 5 days.
Usman bin Affan ruled for 12 years less 12 days, and Ali bin Abi Talib ruled for 5 years and 3
months (Ahmad, 2000:12). (4) There has not been much friction thought with the Byzantine
(Greek) and Sasanian (Persian) scientific mainstream, because the mastery of Greece and
Persia has not yet reached the process of assimilating scientific potential (see Hodgson, 1999:
287).
While there were not many Muslim thinkers in the field of economics during the
Ummayah dynasty due to, among others; (1) The leader's busyness in expanding new
territories which was quite labor and time consuming. (2) The government system tended to
be Arab-centric, the Arab style was very dominant in the bureaucratic system during the
Ummayah dynasty. Non-Arabs - consisting of Persian descendants - commonly called mawali
were treated as second-class citizens. This situation affected the dialectic between the
bureaucracy and the Persians, in fact, as the more educated people were not so good. (3)
Geographically, Damascus, the capital of the Ummayah dynasty consisted mostly of Arabs, so
it was far from the interaction of the outside world, in contrast to Bagdad, the capital of the
Abbasid dynasty, which was close to Cteshipon, the former capital of the Sassanid empire,
Persia. (see Saefudin, 2002: 30-31)
While progress Islamic thought at period dynasty Abbasid dynasty was caused by; (1)
The contact between Islam and Persia became the development of science and philosophy
because Persia culturally played a major role in the development of the Greek scientific
tradition. (2) There was a great deal of activity in translating Greek literature into Arabic.
According to Mehdi Nakosteen, the translation movement was influenced by the previous
translation movement carried out during the Sassanid Empire, which was centered at the
Jundishapur Academy. This academy was the center for translating Greek and Hindu works of
science and philosophy into Pahlavi. From this school also came some important translations
from Sanskrit, Pahlavi and Syriac into Arabic. (Nakosteen, 1964:33) (3) The relative absence
of territorial clearances and rebellions ensured the stability of the government so that the
government's concentration on promoting intellectual aspects found opportunities. (4) The
existence of heterogeneous civilizations and cultures in Baghdad led to a process of
interaction between one culture and another; Arab, Greek, Persian, and Hindu which had an
impact on intellectual development. Bagdad was also inhabited by the rest of the population
native Chaldaeans and Suryani. (5) Bagdad was considered strategic and profitable because it
was passed by the Tigris and Euphrates rivers. (Saefuddin, 2002: 149) Goods can go in and
out through the river using boats so that Bagdad becomes a bustling economic satellite with
commodities being traded.
Then, the science of economics during the Ummayah or Abbasid era is certainly not as
familiar today. From the above historical developments we can note that (1) Economics is an
integral part of the political, social and cultural life of Islamic society so that economic
thought in the work of Muslim thinkers is difficult to separate from political and cultural
thought. This can be proven by the number of books written by Muslim thinkers who unite
economic problems with social, political and cultural problems. (2) Muslim thinkers are
known as Muslim economists because they have documented works through written works
that can be accessed by generations after him, and or known because there are students of the
Muslim thinker who documented his economic his economic thought. (3) Every Muslim
thinker expresses economic or social, political and cultural issues influenced by the
background of each Muslim thinker's life; residence, country, occupation and others.
The development of Muslim economic thought in Europe
The development of knowledge in the Islamic world influenced the progress of thought
in the European world. The influence to Europe is through several ways as follows:
Travels.
During the 11th and early centuries 12 Several Latin-Scholastic European scholars traveled in
several Arab countries to learn Arabic in order to gain knowledge to bring back to Europe.
During this period many students from Italy, Spain and Southern France attended Muslim
studies to learn mathematics, philosophy, medicine, cosmography, and mathematics other
studies in order to be able to teach in Western universities-which were established after the
studies in the Muslim world (Sharif, 1966:1367).
Translation.
From the 11th to the 14th century, there was a great deal of translation from Arabic to
Latin, not only of Arabic writing, but from Arabic to Hebrew. This was done in Spain, Italy
and France. Some notable translators are known from medieval history such as Adelard of
Bath, Constantine the African, Michael the Sct, Herman the German, Dominic Gundisilavi,
John of Seville, Plato of Trivoli, William of Luna, Gerard of Cremona, and Aflred of Sareshel
(Durant, 1950:910) According to Crombie during the Middle Ages, the translation of Arabic
into Latin was a major undertaking 14th and 15th centuries, Scholastic Europe was also not
directly influenced by the legacy of European thinkers, they still used the knowledge of
Muslim thinkers (see Crombie, 1963: 30).
Oral Tradition
Other important influential sources in the oral tradition are insufficiently available.
According to Chejne that specifically for Oral tradition is an important factor, and this is
evidenced by the literary relationship between the Arabs and the West. According to Chejne,
oral transmission took place over a long period of time and relations were maintained between
Muslims and Christians by being bilingual in Spanish. (see Chejne, 1980:111)
Trade
Some authors point out that trade brought the Arab world through Russian roads to
Polania, the Baltic, Scadinavia, central-western Europe and Iceland. Through trade resulting
in the spread of economic institutions, Arab money was used in the Christian Kingdom of the
North, where there had been no coins for 400 years. (see Hitti, 1943:144)
Diffusion and Institutions
Udovich reports that by the 15th century, there were already various contracts of trust
and partnership between Venetians and Arab merchants in Alexandria. These contractual
forms originated in the Islamic world and eventually spread in Latin Europe through contact
with Muslim scholars and scholars legal experts. Then, the emergence of various forms of
instruments and institutions facilitating the development of commerce and trade in Europe,
such as bills of exchange (siftajah), letters of credit (hawala), specialized trading centers
(funduq) and private banks (ma'una) (see Kramers, 1934:102).
Crusades
The crusades that took place from 1092 to 1292 were a long time for Europe to use to
gain knowledge from the Islamic world. According to Ferruollo, during this period the
Muslim community helped shape European attitudes, feelings and values (see Ferruollo,
1984: 42).
Why Europeans do not recognize that Islamic science is big enough to influence the
development of science in Europe, because (1) Europe in medieval times was known to be
very hostile to the Islamic world. This made it difficult for Europeans to accept the
advantages that had been obtained by the Muslim community (Ghanzanfar, 2002:153); and
(2) Scholars at that time borrowing without telling was a common practice, besides property
rights in the 12th century were not yet recognized. In this regard, the Spanish-era priest of the
Domician order, Raymund Martin - who influenced St. Thomas Aquinas - is known to have
sourced his book Pugio Fidei from al Ghazali's Tahafut al-Falasifa, Maqasid ul-Falasifa, al-
Munqid, Mishkat ul-Anwar, and Ihya Ulumuddin, without citing the references (see Sharif,
1966: 1361)).
If traced further, let alone listen back to how the development of Muslim thought about
Islamic economics that already exists (the author described above) which can be traced since
the life of the Prophet Muhammad SAW. Adam Smith was named the father of modern
economics along with the launch of economic thought in a book entitled 'An Inquiry into the
nature causes the wealth of nations'. From Smith's thought, a tradition of scientific thought
was born Classical economics emphasizes the freedom of market mechanisms in measuring
economic activity (laises faire) without being disturbed by government policies.
Adam Smith gave an example of an economically backward society is the Indians in
North America. While an example of an advanced economic society is the Arabs. The Arabs
Adam Smith meant were certainly a nation of traders in the days of the Prophet. Because in
the next explanation he said that the nation led by Muhammad and the generations after him.
From Adam Smith's explanation, it is clear that he recognized the superiority and
greatness of the Muslim economy in the past. Therefore, it is likely that he has indirectly
adopted Islamic economic theories. The indication shows that the progress of the Islamic
economy in medieval times was felt in England, Adam Smith's homeland, even long before he
was born. In 774 AD, King Offa in England at that time minted gold coins which were a
direct copy of the Islamic dinar, including its Arabic writing. All The writing on the coin is
Arabic, except on one side it says OFFAREX.
This reality shows that the Islamic dinar was then the strongest currency in the world. In
addition, the Muslim economy was far more advanced than Europe. It showed that Muslim
international trade had reached as far as Northern Europe. In 1764, Adam Smith gave up his
professorship in Glasgow England and chose his new career as economic advisor to the Duke
of Buccleuch. It was during this period that Smith traveled extensively abroad, especially to
France. Here he met many famous philosophers. Smith began writing The Wealth of Nations
while he was in France and completed it in 1766, in Kirdcaldy. And ten years later it was
published, namely in 1776. At that time in Europe there were already translated books by
Muslim economists. In fact, in the South of France, many professors were applying the
teaching patterns they had learned from Muslim countries. The explanation above shows that
the role of Muslim scientists is very significant to the rise of European intellectualism,
including in economic thought.
In the next development of classical economic thought was not always able to solve all
the economic problems that are growing increasingly complex, one proof is the emergence of
a severe depression of the world economy ahead of World War II (malaise period). From here
then inspired the birth of economic thought that emphasizes the need for the role of
government in regulating economic activity. This thinking was pioneered by John Maynard
Keynes who is considered a modern economic figure who developed the idea of short-term
economic analysis to encourage economic growth and overcome the problems of
unemployment and inflation.
Contemporary Islamic economic thought can be categorized into three groups of schools
of thought, namely:
Baqir As-Sadr's School
Mainstream Mazhab
Alternative Mazhab
Baqir As-Sadr's School
Scholars who became pioneers of this school are Baqir as- Sadr and Ali Shariati and
scholars from Iran and Iraq. According to As-Sadr's thinking that in studying economics must
be seen from two aspects, namely aspects of philosophy of economics or normative economics
and aspects of positive economics. An example of positive economics, i.e. studying the theory
of consumption and demand which is a common and acceptable phenomenon by anyone
without being influenced by idiology. Meanwhile, from the aspect of phylosophy of
economics which is the result of human thought, it will be found that each human group has
an idiology, a perspective that is not the same. An example is the discussion of 'justice'.
According to the concept of classical capitalism, what is meant by fairness is that you get
what you deserve, meaning 'you get what you have worked for'. Meanwhile, according to
classical socialism, the meaning of 'fair' is that no one has previlege to get more than others,
meaning that no one gets facilities to get more than others, in other words, everyone gets the
same. But Islam has its own meaning in interpreting 'fair' which is laa tadhlimuuna wa laa
tudhlamuuna meaning not to harm each other. So according to Baqir As-sadr's school of
thought, there is a difference in principle between economics and Islamic ideology, Therefore,
there will never be a common ground between Islam and economics.
Economics states that economic problems arise because of the problem of scarcity of
economic resources (scarcity) compared to human needs which are unlimited. In this case, the
school of Baqir As-Sadr rejects the understanding of economic science because in Islam it has
been confirmed that Allah Swt. has created creatures in this world including humans in the
sufficiency of economic resources as stated in His word:1
َ
َقَلَخَ
وََ
لُكَََ
فٍَءْيَش-َ
ُهَر دَقَََت-َْ
يِدْق-اًر
"...........................................................
.......... And He has created all things, and He has measured them out with precision."
Furthermore, according to the school of Baqir As-Sadr, the main problem faced by all
human beings in this world is the problem of unequal distribution of wealth. How the gift
given by Allah SWT to all creatures including humans can be distributed evenly and
proportionally. According to the school of Baqir As-Sadr to realize this, there are several
steps taken, namely:
replacing the term economics with the term iqtishad which implies that it is harmonious,
equal, and balanced (in between).
compile and reconstruct a separate economic science derived from the Qur'an and
Assunnah.
This is the contribution of Baqir As-sadr's school which is quite significant in the
discourse of the development of Islamic economics.
Mainstream Mazhab
Islamic economic thought from the mainstream school of thought is what gives the most
color in the discourse of Islamic economics now because most of its figures from the Islamic
Development Bank (IDB) which has funding facilities and cooperation networks with various
international institutions. The figures of the mainstream school include M. Umer Chapra, M.
A. Mannan, Nejatullah Siddiqi, Khurshid Ahmad, Monzer Kahf etc. equilibrium. But
relatively at a certain time and in a certain place there will still be a problem of scarcity. So
until here there is no difference between conventional economics and Islamic economics. The
difference is only in the mechanism of solving economic problems that according to the
mainstream school must refer to the Qur'an and Assunnah. While in the view of classical
capitalism the solution through the operation of the market mechanism, and classical
socialism through a centralized planning system.
Alternative Mazhab
In contrast to the views of the two previous schools, the alternative school sees that
Baqir as-Sadr's school of thought tries to explore and find a new Islamic economic paradigm
by leaving the conventional economic paradigm. While the mainstream school is considered
to be another face of the neoclassical view by eliminating the element of interest and adding
zakat.
The alternative school led by Prof. Timjur Kura (Chair of the Economics Department at
the University of Southern California), Prof. Jomo and Prof. Muhammad Arief contributes
through critical analysis of economics not only on the views of capitalism and socialism but
also criticizes the development of economic discourse. Islamic economic discourse. They
Islam is a view or ideology that is absolute truth that talks about Islamic economics means
studying human thinking about the verses of God and the sunnah of the Prophet in the
economic aspect. So according to this alternative school of Islamic economics is a
discourse that can still be debated because it is a human interpretation of the Qur'an
and Assunnah that needs to be tested and studied continuously.
Actually there is still one more Islamic economic discourse that is also beginning to
develop in the Islamic world, namely the thought of implementing a gold currency system as
a substitute for paper currency. (which was driven by Dr. Umar Vadillo and the Hisbut Tahrir
activist group) as happened / used during the Abbasid reign, namely the dinar and dirham
(gold and silver) currencies.
However, their thoughts cannot be included in a separate school of thought because they
are relative It is still premature and has not been supported by theoretical foundations and
empirical tests in the context of modern life. Moreover, in economic practice in the field it is
over valued so that instead a currency made of copper called "fulus" was created. Ibn
Taymiyah said: "There is no problem with money not coming from gold and silver as long as
the government is able to maintain its value". Al-Maghribi stated: "If the government prints
money continuously, it means that the government does not maintain the value of the
currency". In another section Ibn Qayyim warned: "If the government continuously prints
money, it can cause usury khafi (hidden usury) in the community, namely usury framed by
buying and selling transactions". This is in accordance with the meaning of the Hadith of the
Prophet, namely "There will come a time when people legalize usury by means of buying
and selling".
Muhammad Nejatullah Siddiqi in his book "Reading in Islamic Economic Thought"
explains the history of Islamic economic thought in four phases, namely:
Phase I: 113 H-451 H/731 M- 1058 M.
Phase II: 450 H-850 H / 1058 M-1446 M.
Phase III: 850 H-1350 H / 1446 M-1932 M.
Phase IV: 1932 AD-present.
In the first phase, it is known that there were 15 Muslim economists who actually
contributed to the development of economic thought, while at the same time there were no
economists from mainland Europe. Known at that time figures such as Abu Yusuf,
Muhammad bin Hasan al-Ahaibani, Harist bin Asan al-Muhadibi, Zaid bin Ali Zainal Abidin
bin Hussein bin Ali bin Abi Talib, Junaid Baghdadi, Ibn Miskawaih, Mawardi, etc.
The discourse that developed at that time was macroeconomic thinking concerning
fiscal policy and state finances as reported in Abu Yusuf's book of Al- Kharaj, which is a
book that is written by Abu Yusuf explains the mechanism for imposing taxes on land. Then
also Abu Ubaid in the book Al-Amwal describes how the management of state finances and
the state budget. In the book Al-Ahkam Al-Sulthaniyah by Mawardi discusses more about the
problem of government administration. And by other Islamic economic thinkers have also
been touched on the operation of unfair market mechanisms.
In the second phase of the development of Islamic economic thought, the discourse on
economics intensively began to develop even though on the other hand it was characterized
by changes in the structure of Islamic power which was getting wider. Several major figures
came to the fore such as Imam Al-Ghozali, Ibn Taymiyah, Ibn Khaldun, Ibn Qayyim. In this
second phase, the scientific discourse was directed more towards microeconomic analysis and
the function of money.
Imam Al-Ghozali addressed the issue of money and its functions. According to Imam
Al-Ghazali, it is not a problem to apply a non-gold and silver currency as long as the
government is able to maintain the stability of the currency as a legal tender. In one of his
writings he said "Money is like a mirror, colorless but can reflect all colors" and he also said
"If money has been traded, then it is the same as imprisoning the function of money", so that if
that happens it will cause depreciation of the currency exchange rate against other currencies.
He also explained about the prohibition of usury fadhl and its impact on the economy. Al-
Ghozali's intensive economic studies also touched on the issue of scales, price control (market
intervention), determination of taxes in an emergency, etc. In some parts of his thought also
touches on how the market mechanism works through the power of demand and supply.
(supply) in determining the market equilibrium.
An example of how to overcome the impact of price increases in order to stabilize
market prices is reflected in the government of Umar bin Khatab when there was inflation
caused by crop failure in the Hijaz area as the center of wheat production. The policy applied
by the government at that time to overcome it was through the market mechanism by
increasing the supply of wheat imported from Fuztadz Egypt so that prices returned to normal.
Conversely, if inflation is caused by market distortions such as monopolistic practices
and market hoarding, then the solution applied is not not by using the market mechanism but
through government intervention. Ibn Taymiyah has long suggested that the government
needs to conduct price intervention at the original equilibrium price to break the behavior of
monopolists and hoarding of goods. In contrast to government intervention, the views of
conventional economists suggest that Price fixing is done at the ceiling price or at the floor
price. Then what about the Prophet's hadith regarding the issue of price increases in Medina at
that time, namely "Allah is the one who determines prices. It is Allah who determines
provision and it is Allah who withholds provision". Apparently it was this hadith that later
inspired some economists to conceptualize the operation of the market mechanism by the
invisible hand. If so, is the proposition put forward by Ibn Taymiyyah regarding price
intervention contrary to the intent of the Prophet's hadith above? The answer is no! because
the direction and purpose of government intervention is so that the equilibrium price in the
market returns to the initial equilibrium position (equilibrium).
The third phase was a period of the rise of European civilization. At that time, 22
economists emerged while at the same time there were only a few Muslim scholars, namely
the Shah of Islam waliAllah with his work Hujjah Allah Al-Balighah which explains how the
provisions of sharia in relation to the behavior of an individual and the arrangement of social
organizations, other scholars are Muhammad Iqbal and Jamaluddin Al- Afghani.
We are familiar with the famous European economists such as JS Mill, Alfred Marshal
who formed the classical capitalist school. Behind them came the names of Karl Marx, Lenin
who gave birth to the socialist school. Then came JM Keynes with his Neo Classical school.
In this phase, economic thought from the West really dominated the world until now.
Meanwhile, Muslim scholars continue to experience moral and intellectual decline so that
most Islamic countries become colonies of western countries.
The fourth phase was characterized by the emergence of a new consciousness among
Muslims. A moral and intellectual awakening among Muslims gave birth to several names
such as Sayyid Qutb, Al- Maududi and Yusuf Qardhawi. However, his thoughts are more
inclined to the approach of fiqh, including the work of scientist Abu al- A'la al-Maududi from
Pakistan. It was not until a decade later that scientific works on Islamic economics began to
appear, especially after the first world conference of Muslims in Mecca in 1976 with the main
theme of Islamic economics (Qardhawi, 1997: 20-21).
Like a sleeping person, the study of Islamic economics as a science at the end of the
1970s was like stumbling awake, and this awakening seems to be related to the trends that
occurred in the world due to the economic crisis of 1974, with the birth of what is called the
flow or monetarist thinking, which further consensus Keynesian began to be abandoned
because it was considered no longer able to overcome the problems of contemporary
economics, this tendency is getting stronger after the collapse of Russia's socialist-communist
economy.
From 1980 until now, the awareness of Muslim thought developed quite rapidly, marked
by the emergence of three schools of Muslim thought, namely the Baqir As-Sadr school
(iqtishoduna), the mainstream school and the alternative school. In this phase, several
prominent names emerged such as MA. Mannan, Annas Zarka, Khurshid Ahmad, Nejatullah
Siddiqi, Hasanus Zaman, etc.
From research conducted by Umer Chapra, for example, it can be seen that the capitalist
economic system that relies on market mechanisms has failed to realize its goals, both
positive goals and normative goals.3 Similar failures achieving 'efficient and fair' economic
activity in the process of allocation and distribution of limited resources. While normative
goals are universal goals based on certain norms from all socio-economic aspects such as fair
income distribution, optimal growth rates etc. that are structured based on religious norms
also experienced by the socialist economic system. Actually, the purpose of the socialist
economic system is to correct various problems found in the capitalist economic system, so
that one of the goals of this socialist economic system is the creation of shared prosperity,
where with the implementation of the system there will no longer be various social classes in
society, economic equality occurs, and society will be free from all kinds of tyranny. This
goal turned out to be a failure, because the designers of the system did not understand what
human beings really meant. In this system, people were treated as cogs in a machine called
the state rather than a system built on the spontaneous and voluntary interactions of individual
economic actors.
Therefore, the development of Islamic economics as an alternative system is very
necessary, and with this alternative economic system the goal of economic activity to achieve
maqosidus shar'iah, which is an effort to improve the quality of economic activity to improve
the welfare of all human beings can be realized. The religious moral element is thus part of
the Islamic economic theory itself, and the Islamic economic mechanism to achieve prosperity
efficiently is built through the values of justice, equity and the development of the fiscal
sector in encouraging economic dynamics.
Conclusion
The above quote shows that Islamic economic thought in classical times was very
advanced and developed before Western scientists discussed it in the 18th-19th centuries. This
fact must be considered by contemporary economists, not only Muslim economists but also
non-Muslim economists around the world. Contribution of Islamic Economics to Modern
Economics In the past three decades, the study and research of Islamic economics has
flourished again. Various international forums on Islamic economics have been held
frequently and widely in various countries, such as conferences seminars, symposiums and
workshops. Dozens of doctors and professors of Islamic economics who are experts in both
conventional and shari'ah economics, appear as speakers in these forums. From their study,
they found that Islamic economic theory is actually not a new science or a science that is
fundamentally derived from modern economic theory that is developing today. Historical
facts show that classical Islamic scientists are the inventors and founders of all scientific
fields, including economics.
Circumstances in each period
There were several circumstances that resulted in the period of khulafa' al- rashidun not
many economists were born, including (1) Al Quran and al Hadith become the main source in
running people's lives. (2) The dominance of policy is more influenced by the attitude of the
leader as a representation of the successor to the Prophet Muhammad. This makes the caliph's
decision a reference in carrying out activities in the social field. (3) The scientific capacity of
each caliph is not the same, the period of leadership of the caliph is relatively different and the
end of his power 3 caliphs ended in political tragedy;. Abu Bakar's caliphate lasted for 2
years, 3 months, 11 days. Umar bin Khattab held the caliphate for 10 years, 6 months, 5 days.
Usman bin Affan ruled for 12 years less 12 days, and Ali bin Abi Talib ruled for 5 years and 3
months (Ahmad, 2000:12). (4) There has not been much friction thought with the Byzantine
(Greek) and Sasanian (Persian) scientific mainstream, because the mastery of Greece and
Persia has not yet reached the process of assimilating scientific potential (see Hodgson, 1999:
287).
While there were not many Muslim thinkers in the field of economics during the
Ummayah dynasty due to, among others; (1) The leader's busyness in expanding new
territories which was quite labor and time consuming. (2) The government system tended to
be Arab-centric, the Arab style was very dominant in the bureaucratic system during the
Ummayah dynasty. Non-Arabs - consisting of Persian descendants - commonly called mawali
were treated as second-class citizens. This situation affected the dialectic between the
bureaucracy and the Persians, in fact, as the more educated people were not so good. (3)
Geographically, Damascus, the capital of the Ummayah dynasty consisted mostly of Arabs, so
it was far from the interaction of the outside world, in contrast to Bagdad, the capital of the
Abbasid dynasty, which was close to Cteshipon, the former capital of the Sassanid empire,
Persia. (see Saefudin, 2002: 30-31)
While progress Islamic thought at period dynasty Abbasid dynasty was caused by; (1)
The contact between Islam and Persia became the development of science and philosophy
because Persia culturally played a major role in the development of the Greek scientific
tradition. (2) There was a great deal of activity in translating Greek literature into Arabic.
According to Mehdi Nakosteen, the translation movement was influenced by the previous
translation movement carried out during the Sassanid Empire, which was centered at the
Jundishapur Academy. This academy was the center for translating Greek and Hindu works of
science and philosophy into Pahlavi. From this school also came some important translations
from Sanskrit, Pahlavi and Syriac into Arabic. (Nakosteen, 1964:33) (3) The relative absence
of territorial clearances and rebellions ensured the stability of the government so that the
government's concentration on promoting intellectual aspects found opportunities. (4) The
existence of heterogeneous civilizations and cultures in Baghdad led to a process of
interaction between one culture and another; Arab, Greek, Persian, and Hindu which had an
impact on intellectual development. Bagdad was also inhabited by the rest of the population
native Chaldaeans and Suryani. (5) Bagdad was considered strategic and profitable because it
was passed by the Tigris and Euphrates rivers. (Saefuddin, 2002: 149) Goods can go in and
out through the river using boats so that Bagdad becomes a bustling economic satellite with
commodities being traded.
Then, the science of economics during the Ummayah or Abbasid era is certainly not as
familiar today. From the above historical developments we can note that (1) Economics is an
integral part of the political, social and cultural life of Islamic society so that economic
thought in the work of Muslim thinkers is difficult to separate from political and cultural
thought. This can be proven by the number of books written by Muslim thinkers who unite
economic problems with social, political and cultural problems. (2) Muslim thinkers are
known as Muslim economists because they have documented works through written works
that can be accessed by generations after him, and or known because there are students of the
Muslim thinker who documented his economic his economic thought. (3) Every Muslim
thinker expresses economic or social, political and cultural issues influenced by the
background of each Muslim thinker's life; residence, country, occupation and others.
The development of Muslim economic thought in Europe
The development of knowledge in the Islamic world influenced the progress of thought
in the European world. The influence to Europe is through several ways as follows:
Travels.
During the 11th and early centuries 12 Several Latin-Scholastic European scholars traveled in
several Arab countries to learn Arabic in order to gain knowledge to bring back to Europe.
During this period many students from Italy, Spain and Southern France attended Muslim
studies to learn mathematics, philosophy, medicine, cosmography, and mathematics other
studies in order to be able to teach in Western universities-which were established after the
studies in the Muslim world (Sharif, 1966:1367).
Translation.
From the 11th to the 14th century, there was a great deal of translation from Arabic to
Latin, not only of Arabic writing, but from Arabic to Hebrew. This was done in Spain, Italy
and France. Some notable translators are known from medieval history such as Adelard of
Bath, Constantine the African, Michael the Sct, Herman the German, Dominic Gundisilavi,
John of Seville, Plato of Trivoli, William of Luna, Gerard of Cremona, and Aflred of Sareshel
(Durant, 1950:910) According to Crombie during the Middle Ages, the translation of Arabic
into Latin was a major undertaking 14th and 15th centuries, Scholastic Europe was also not
directly influenced by the legacy of European thinkers, they still used the knowledge of
Muslim thinkers (see Crombie, 1963: 30).
Oral Tradition
Other important influential sources in the oral tradition are insufficiently available.
According to Chejne that specifically for Oral tradition is an important factor, and this is
evidenced by the literary relationship between the Arabs and the West. According to Chejne,
oral transmission took place over a long period of time and relations were maintained between
Muslims and Christians by being bilingual in Spanish. (see Chejne, 1980:111)
Trade
Some authors point out that trade brought the Arab world through Russian roads to
Polania, the Baltic, Scadinavia, central-western Europe and Iceland. Through trade resulting
in the spread of economic institutions, Arab money was used in the Christian Kingdom of the
North, where there had been no coins for 400 years. (see Hitti, 1943:144)
Diffusion and Institutions
Udovich reports that by the 15th century, there were already various contracts of trust
and partnership between Venetians and Arab merchants in Alexandria. These contractual
forms originated in the Islamic world and eventually spread in Latin Europe through contact
with Muslim scholars and scholars legal experts. Then, the emergence of various forms of
instruments and institutions facilitating the development of commerce and trade in Europe,
such as bills of exchange (siftajah), letters of credit (hawala), specialized trading centers
(funduq) and private banks (ma'una) (see Kramers, 1934:102).
Crusades
The crusades that took place from 1092 to 1292 were a long time for Europe to use to
gain knowledge from the Islamic world. According to Ferruollo, during this period the
Muslim community helped shape European attitudes, feelings and values (see Ferruollo,
1984: 42).
Why Europeans do not recognize that Islamic science is big enough to influence the
development of science in Europe, because (1) Europe in medieval times was known to be
very hostile to the Islamic world. This made it difficult for Europeans to accept the
advantages that had been obtained by the Muslim community (Ghanzanfar, 2002:153); and
(2) Scholars at that time borrowing without telling was a common practice, besides property
rights in the 12th century were not yet recognized. In this regard, the Spanish-era priest of the
Domician order, Raymund Martin - who influenced St. Thomas Aquinas - is known to have
sourced his book Pugio Fidei from al Ghazali's Tahafut al-Falasifa, Maqasid ul-Falasifa, al-
Munqid, Mishkat ul-Anwar, and Ihya Ulumuddin, without citing the references (see Sharif,
1966: 1361)).
If traced further, let alone listen back to how the development of Muslim thought about
Islamic economics that already exists (the author described above) which can be traced since
the life of the Prophet Muhammad SAW. Adam Smith was named the father of modern
economics along with the launch of economic thought in a book entitled 'An Inquiry into the
nature causes the wealth of nations'. From Smith's thought, a tradition of scientific thought
was born Classical economics emphasizes the freedom of market mechanisms in measuring
economic activity (laises faire) without being disturbed by government policies.
Adam Smith gave an example of an economically backward society is the Indians in
North America. While an example of an advanced economic society is the Arabs. The Arabs
Adam Smith meant were certainly a nation of traders in the days of the Prophet. Because in
the next explanation he said that the nation led by Muhammad and the generations after him.
From Adam Smith's explanation, it is clear that he recognized the superiority and
greatness of the Muslim economy in the past. Therefore, it is likely that he has indirectly
adopted Islamic economic theories. The indication shows that the progress of the Islamic
economy in medieval times was felt in England, Adam Smith's homeland, even long before he
was born. In 774 AD, King Offa in England at that time minted gold coins which were a
direct copy of the Islamic dinar, including its Arabic writing. All The writing on the coin is
Arabic, except on one side it says OFFAREX.
This reality shows that the Islamic dinar was then the strongest currency in the world. In
addition, the Muslim economy was far more advanced than Europe. It showed that Muslim
international trade had reached as far as Northern Europe. In 1764, Adam Smith gave up his
professorship in Glasgow England and chose his new career as economic advisor to the Duke
of Buccleuch. It was during this period that Smith traveled extensively abroad, especially to
France. Here he met many famous philosophers. Smith began writing The Wealth of Nations
while he was in France and completed it in 1766, in Kirdcaldy. And ten years later it was
published, namely in 1776. At that time in Europe there were already translated books by
Muslim economists. In fact, in the South of France, many professors were applying the
teaching patterns they had learned from Muslim countries. The explanation above shows that
the role of Muslim scientists is very significant to the rise of European intellectualism,
including in economic thought.
In the next development of classical economic thought was not always able to solve all
the economic problems that are growing increasingly complex, one proof is the emergence of
a severe depression of the world economy ahead of World War II (malaise period). From here
then inspired the birth of economic thought that emphasizes the need for the role of
government in regulating economic activity. This thinking was pioneered by John Maynard
Keynes who is considered a modern economic figure who developed the idea of short-term
economic analysis to encourage economic growth and overcome the problems of
unemployment and inflation.
Contemporary Islamic economic thought can be categorized into three groups of schools
of thought, namely:
Baqir As-Sadr's School
Mainstream Mazhab
Alternative Mazhab
Baqir As-Sadr's School
Scholars who became pioneers of this school are Baqir as- Sadr and Ali Shariati and
scholars from Iran and Iraq. According to As-Sadr's thinking that in studying economics must
be seen from two aspects, namely aspects of philosophy of economics or normative economics
and aspects of positive economics. An example of positive economics, i.e. studying the theory
of consumption and demand which is a common and acceptable phenomenon by anyone
without being influenced by idiology. Meanwhile, from the aspect of phylosophy of
economics which is the result of human thought, it will be found that each human group has
an idiology, a perspective that is not the same. An example is the discussion of 'justice'.
According to the concept of classical capitalism, what is meant by fairness is that you get
what you deserve, meaning 'you get what you have worked for'. Meanwhile, according to
classical socialism, the meaning of 'fair' is that no one has previlege to get more than others,
meaning that no one gets facilities to get more than others, in other words, everyone gets the
same. But Islam has its own meaning in interpreting 'fair' which is laa tadhlimuuna wa laa
tudhlamuuna meaning not to harm each other. So according to Baqir As-sadr's school of
thought, there is a difference in principle between economics and Islamic ideology, Therefore,
there will never be a common ground between Islam and economics.
Economics states that economic problems arise because of the problem of scarcity of
economic resources (scarcity) compared to human needs which are unlimited. In this case, the
school of Baqir As-Sadr rejects the understanding of economic science because in Islam it has
been confirmed that Allah Swt. has created creatures in this world including humans in the
sufficiency of economic resources as stated in His word:1
َ
َقَلَخَ
وََ
لُكَََ
فٍَءْيَش-َ
ُهَر دَقَََت-َْ
يِدْق-اًر
"...........................................................
.......... And He has created all things, and He has measured them out with precision."
Furthermore, according to the school of Baqir As-Sadr, the main problem faced by all
human beings in this world is the problem of unequal distribution of wealth. How the gift
given by Allah SWT to all creatures including humans can be distributed evenly and
proportionally. According to the school of Baqir As-Sadr to realize this, there are several
steps taken, namely:
replacing the term economics with the term iqtishad which implies that it is harmonious,
equal, and balanced (in between).
compile and reconstruct a separate economic science derived from the Qur'an and
Assunnah.
This is the contribution of Baqir As-sadr's school which is quite significant in the
discourse of the development of Islamic economics.
Mainstream Mazhab
Islamic economic thought from the mainstream school of thought is what gives the most
color in the discourse of Islamic economics now because most of its figures from the Islamic
Development Bank (IDB) which has funding facilities and cooperation networks with various
international institutions. The figures of the mainstream school include M. Umer Chapra, M.
A. Mannan, Nejatullah Siddiqi, Khurshid Ahmad, Monzer Kahf etc. equilibrium. But
relatively at a certain time and in a certain place there will still be a problem of scarcity. So
until here there is no difference between conventional economics and Islamic economics. The
difference is only in the mechanism of solving economic problems that according to the
mainstream school must refer to the Qur'an and Assunnah. While in the view of classical
capitalism the solution through the operation of the market mechanism, and classical
socialism through a centralized planning system.
Alternative Mazhab
In contrast to the views of the two previous schools, the alternative school sees that
Baqir as-Sadr's school of thought tries to explore and find a new Islamic economic paradigm
by leaving the conventional economic paradigm. While the mainstream school is considered
to be another face of the neoclassical view by eliminating the element of interest and adding
zakat.
The alternative school led by Prof. Timjur Kura (Chair of the Economics Department at
the University of Southern California), Prof. Jomo and Prof. Muhammad Arief contributes
through critical analysis of economics not only on the views of capitalism and socialism but
also criticizes the development of economic discourse. Islamic economic discourse. They
Islam is a view or ideology that is absolute truth that talks about Islamic economics means
studying human thinking about the verses of God and the sunnah of the Prophet in the
economic aspect. So according to this alternative school of Islamic economics is a
discourse that can still be debated because it is a human interpretation of the Qur'an
and Assunnah that needs to be tested and studied continuously.
Actually there is still one more Islamic economic discourse that is also beginning to
develop in the Islamic world, namely the thought of implementing a gold currency system as
a substitute for paper currency. (which was driven by Dr. Umar Vadillo and the Hisbut Tahrir
activist group) as happened / used during the Abbasid reign, namely the dinar and dirham
(gold and silver) currencies.
However, their thoughts cannot be included in a separate school of thought because they
are relative It is still premature and has not been supported by theoretical foundations and
empirical tests in the context of modern life. Moreover, in economic practice in the field it is
over valued so that instead a currency made of copper called "fulus" was created. Ibn
Taymiyah said: "There is no problem with money not coming from gold and silver as long as
the government is able to maintain its value". Al-Maghribi stated: "If the government prints
money continuously, it means that the government does not maintain the value of the
currency". In another section Ibn Qayyim warned: "If the government continuously prints
money, it can cause usury khafi (hidden usury) in the community, namely usury framed by
buying and selling transactions". This is in accordance with the meaning of the Hadith of the
Prophet, namely "There will come a time when people legalize usury by means of buying
and selling".
Muhammad Nejatullah Siddiqi in his book "Reading in Islamic Economic Thought"
explains the history of Islamic economic thought in four phases, namely:
Phase I: 113 H-451 H/731 M- 1058 M.
Phase II: 450 H-850 H / 1058 M-1446 M.
Phase III: 850 H-1350 H / 1446 M-1932 M.
Phase IV: 1932 AD-present.
In the first phase, it is known that there were 15 Muslim economists who actually
contributed to the development of economic thought, while at the same time there were no
economists from mainland Europe. Known at that time figures such as Abu Yusuf,
Muhammad bin Hasan al-Ahaibani, Harist bin Asan al-Muhadibi, Zaid bin Ali Zainal Abidin
bin Hussein bin Ali bin Abi Talib, Junaid Baghdadi, Ibn Miskawaih, Mawardi, etc.
The discourse that developed at that time was macroeconomic thinking concerning
fiscal policy and state finances as reported in Abu Yusuf's book of Al- Kharaj, which is a
book that is written by Abu Yusuf explains the mechanism for imposing taxes on land. Then
also Abu Ubaid in the book Al-Amwal describes how the management of state finances and
the state budget. In the book Al-Ahkam Al-Sulthaniyah by Mawardi discusses more about the
problem of government administration. And by other Islamic economic thinkers have also
been touched on the operation of unfair market mechanisms.
In the second phase of the development of Islamic economic thought, the discourse on
economics intensively began to develop even though on the other hand it was characterized
by changes in the structure of Islamic power which was getting wider. Several major figures
came to the fore such as Imam Al-Ghozali, Ibn Taymiyah, Ibn Khaldun, Ibn Qayyim. In this
second phase, the scientific discourse was directed more towards microeconomic analysis and
the function of money.
Imam Al-Ghozali addressed the issue of money and its functions. According to Imam
Al-Ghazali, it is not a problem to apply a non-gold and silver currency as long as the
government is able to maintain the stability of the currency as a legal tender. In one of his
writings he said "Money is like a mirror, colorless but can reflect all colors" and he also said
"If money has been traded, then it is the same as imprisoning the function of money", so that if
that happens it will cause depreciation of the currency exchange rate against other currencies.
He also explained about the prohibition of usury fadhl and its impact on the economy. Al-
Ghozali's intensive economic studies also touched on the issue of scales, price control (market
intervention), determination of taxes in an emergency, etc. In some parts of his thought also
touches on how the market mechanism works through the power of demand and supply.
(supply) in determining the market equilibrium.
An example of how to overcome the impact of price increases in order to stabilize
market prices is reflected in the government of Umar bin Khatab when there was inflation
caused by crop failure in the Hijaz area as the center of wheat production. The policy applied
by the government at that time to overcome it was through the market mechanism by
increasing the supply of wheat imported from Fuztadz Egypt so that prices returned to normal.
Conversely, if inflation is caused by market distortions such as monopolistic practices
and market hoarding, then the solution applied is not not by using the market mechanism but
through government intervention. Ibn Taymiyah has long suggested that the government
needs to conduct price intervention at the original equilibrium price to break the behavior of
monopolists and hoarding of goods. In contrast to government intervention, the views of
conventional economists suggest that Price fixing is done at the ceiling price or at the floor
price. Then what about the Prophet's hadith regarding the issue of price increases in Medina at
that time, namely "Allah is the one who determines prices. It is Allah who determines
provision and it is Allah who withholds provision". Apparently it was this hadith that later
inspired some economists to conceptualize the operation of the market mechanism by the
invisible hand. If so, is the proposition put forward by Ibn Taymiyyah regarding price
intervention contrary to the intent of the Prophet's hadith above? The answer is no! because
the direction and purpose of government intervention is so that the equilibrium price in the
market returns to the initial equilibrium position (equilibrium).
The third phase was a period of the rise of European civilization. At that time, 22
economists emerged while at the same time there were only a few Muslim scholars, namely
the Shah of Islam waliAllah with his work Hujjah Allah Al-Balighah which explains how the
provisions of sharia in relation to the behavior of an individual and the arrangement of social
organizations, other scholars are Muhammad Iqbal and Jamaluddin Al- Afghani.
We are familiar with the famous European economists such as JS Mill, Alfred Marshal
who formed the classical capitalist school. Behind them came the names of Karl Marx, Lenin
who gave birth to the socialist school. Then came JM Keynes with his Neo Classical school.
In this phase, economic thought from the West really dominated the world until now.
Meanwhile, Muslim scholars continue to experience moral and intellectual decline so that
most Islamic countries become colonies of western countries.
The fourth phase was characterized by the emergence of a new consciousness among
Muslims. A moral and intellectual awakening among Muslims gave birth to several names
such as Sayyid Qutb, Al- Maududi and Yusuf Qardhawi. However, his thoughts are more
inclined to the approach of fiqh, including the work of scientist Abu al- A'la al-Maududi from
Pakistan. It was not until a decade later that scientific works on Islamic economics began to
appear, especially after the first world conference of Muslims in Mecca in 1976 with the main
theme of Islamic economics (Qardhawi, 1997: 20-21).
Like a sleeping person, the study of Islamic economics as a science at the end of the
1970s was like stumbling awake, and this awakening seems to be related to the trends that
occurred in the world due to the economic crisis of 1974, with the birth of what is called the
flow or monetarist thinking, which further consensus Keynesian began to be abandoned
because it was considered no longer able to overcome the problems of contemporary
economics, this tendency is getting stronger after the collapse of Russia's socialist-communist
economy.
From 1980 until now, the awareness of Muslim thought developed quite rapidly, marked
by the emergence of three schools of Muslim thought, namely the Baqir As-Sadr school
(iqtishoduna), the mainstream school and the alternative school. In this phase, several
prominent names emerged such as MA. Mannan, Annas Zarka, Khurshid Ahmad, Nejatullah
Siddiqi, Hasanus Zaman, etc.
From research conducted by Umer Chapra, for example, it can be seen that the capitalist
economic system that relies on market mechanisms has failed to realize its goals, both
positive goals and normative goals.3 Similar failures achieving 'efficient and fair' economic
activity in the process of allocation and distribution of limited resources. While normative
goals are universal goals based on certain norms from all socio-economic aspects such as fair
income distribution, optimal growth rates etc. that are structured based on religious norms
also experienced by the socialist economic system. Actually, the purpose of the socialist
economic system is to correct various problems found in the capitalist economic system, so
that one of the goals of this socialist economic system is the creation of shared prosperity,
where with the implementation of the system there will no longer be various social classes in
society, economic equality occurs, and society will be free from all kinds of tyranny. This
goal turned out to be a failure, because the designers of the system did not understand what
human beings really meant. In this system, people were treated as cogs in a machine called
the state rather than a system built on the spontaneous and voluntary interactions of individual
economic actors.
Therefore, the development of Islamic economics as an alternative system is very
necessary, and with this alternative economic system the goal of economic activity to achieve
maqosidus shar'iah, which is an effort to improve the quality of economic activity to improve
the welfare of all human beings can be realized. The religious moral element is thus part of
the Islamic economic theory itself, and the Islamic economic mechanism to achieve prosperity
efficiently is built through the values of justice, equity and the development of the fiscal
sector in encouraging economic dynamics.
Conclusion
The above quote shows that Islamic economic thought in classical times was very
advanced and developed before Western scientists discussed it in the 18th-19th centuries. This
fact must be considered by contemporary economists, not only Muslim economists but also
non-Muslim economists around the world. Contribution of Islamic Economics to Modern
Economics In the past three decades, the study and research of Islamic economics has
flourished again. Various international forums on Islamic economics have been held
frequently and widely in various countries, such as conferences seminars, symposiums and
workshops. Dozens of doctors and professors of Islamic economics who are experts in both
conventional and shari'ah economics, appear as speakers in these forums. From their study,
they found that Islamic economic theory is actually not a new science or a science that is
fundamentally derived from modern economic theory that is developing today. Historical
facts show that classical Islamic scientists are the inventors and founders of all scientific
fields, including economics.
Circumstances in each period
There were several circumstances that resulted in the period of khulafa' al- rashidun not
many economists were born, including (1) Al Quran and al Hadith become the main source in
running people's lives. (2) The dominance of policy is more influenced by the attitude of the
leader as a representation of the successor to the Prophet Muhammad. This makes the caliph's
decision a reference in carrying out activities in the social field. (3) The scientific capacity of
each caliph is not the same, the period of leadership of the caliph is relatively different and the
end of his power 3 caliphs ended in political tragedy;. Abu Bakar's caliphate lasted for 2
years, 3 months, 11 days. Umar bin Khattab held the caliphate for 10 years, 6 months, 5 days.
Usman bin Affan ruled for 12 years less 12 days, and Ali bin Abi Talib ruled for 5 years and 3
months (Ahmad, 2000:12). (4) There has not been much friction thought with the Byzantine
(Greek) and Sasanian (Persian) scientific mainstream, because the mastery of Greece and
Persia has not yet reached the process of assimilating scientific potential (see Hodgson, 1999:
287).
While there were not many Muslim thinkers in the field of economics during the
Ummayah dynasty due to, among others; (1) The leader's busyness in expanding new
territories which was quite labor and time consuming. (2) The government system tended to
be Arab-centric, the Arab style was very dominant in the bureaucratic system during the
Ummayah dynasty. Non-Arabs - consisting of Persian descendants - commonly called mawali
were treated as second-class citizens. This situation affected the dialectic between the
bureaucracy and the Persians, in fact, as the more educated people were not so good. (3)
Geographically, Damascus, the capital of the Ummayah dynasty consisted mostly of Arabs, so
it was far from the interaction of the outside world, in contrast to Bagdad, the capital of the
Abbasid dynasty, which was close to Cteshipon, the former capital of the Sassanid empire,
Persia. (see Saefudin, 2002: 30-31)
While progress Islamic thought at period dynasty Abbasid dynasty was caused by; (1)
The contact between Islam and Persia became the development of science and philosophy
because Persia culturally played a major role in the development of the Greek scientific
tradition. (2) There was a great deal of activity in translating Greek literature into Arabic.
According to Mehdi Nakosteen, the translation movement was influenced by the previous
translation movement carried out during the Sassanid Empire, which was centered at the
Jundishapur Academy. This academy was the center for translating Greek and Hindu works of
science and philosophy into Pahlavi. From this school also came some important translations
from Sanskrit, Pahlavi and Syriac into Arabic. (Nakosteen, 1964:33) (3) The relative absence
of territorial clearances and rebellions ensured the stability of the government so that the
government's concentration on promoting intellectual aspects found opportunities. (4) The
existence of heterogeneous civilizations and cultures in Baghdad led to a process of
interaction between one culture and another; Arab, Greek, Persian, and Hindu which had an
impact on intellectual development. Bagdad was also inhabited by the rest of the population
native Chaldaeans and Suryani. (5) Bagdad was considered strategic and profitable because it
was passed by the Tigris and Euphrates rivers. (Saefuddin, 2002: 149) Goods can go in and
out through the river using boats so that Bagdad becomes a bustling economic satellite with
commodities being traded.
Then, the science of economics during the Ummayah or Abbasid era is certainly not as
familiar today. From the above historical developments we can note that (1) Economics is an
integral part of the political, social and cultural life of Islamic society so that economic
thought in the work of Muslim thinkers is difficult to separate from political and cultural
thought. This can be proven by the number of books written by Muslim thinkers who unite
economic problems with social, political and cultural problems. (2) Muslim thinkers are
known as Muslim economists because they have documented works through written works
that can be accessed by generations after him, and or known because there are students of the
Muslim thinker who documented his economic his economic thought. (3) Every Muslim
thinker expresses economic or social, political and cultural issues influenced by the
background of each Muslim thinker's life; residence, country, occupation and others.
The development of Muslim economic thought in Europe
The development of knowledge in the Islamic world influenced the progress of thought
in the European world. The influence to Europe is through several ways as follows:
Travels.
During the 11th and early centuries 12 Several Latin-Scholastic European scholars traveled in
several Arab countries to learn Arabic in order to gain knowledge to bring back to Europe.
During this period many students from Italy, Spain and Southern France attended Muslim
studies to learn mathematics, philosophy, medicine, cosmography, and mathematics other
studies in order to be able to teach in Western universities-which were established after the
studies in the Muslim world (Sharif, 1966:1367).
Translation.
From the 11th to the 14th century, there was a great deal of translation from Arabic to
Latin, not only of Arabic writing, but from Arabic to Hebrew. This was done in Spain, Italy
and France. Some notable translators are known from medieval history such as Adelard of
Bath, Constantine the African, Michael the Sct, Herman the German, Dominic Gundisilavi,
John of Seville, Plato of Trivoli, William of Luna, Gerard of Cremona, and Aflred of Sareshel
(Durant, 1950:910) According to Crombie during the Middle Ages, the translation of Arabic
into Latin was a major undertaking 14th and 15th centuries, Scholastic Europe was also not
directly influenced by the legacy of European thinkers, they still used the knowledge of
Muslim thinkers (see Crombie, 1963: 30).
Oral Tradition
Other important influential sources in the oral tradition are insufficiently available.
According to Chejne that specifically for Oral tradition is an important factor, and this is
evidenced by the literary relationship between the Arabs and the West. According to Chejne,
oral transmission took place over a long period of time and relations were maintained between
Muslims and Christians by being bilingual in Spanish. (see Chejne, 1980:111)
Trade
Some authors point out that trade brought the Arab world through Russian roads to
Polania, the Baltic, Scadinavia, central-western Europe and Iceland. Through trade resulting
in the spread of economic institutions, Arab money was used in the Christian Kingdom of the
North, where there had been no coins for 400 years. (see Hitti, 1943:144)
Diffusion and Institutions
Udovich reports that by the 15th century, there were already various contracts of trust
and partnership between Venetians and Arab merchants in Alexandria. These contractual
forms originated in the Islamic world and eventually spread in Latin Europe through contact
with Muslim scholars and scholars legal experts. Then, the emergence of various forms of
instruments and institutions facilitating the development of commerce and trade in Europe,
such as bills of exchange (siftajah), letters of credit (hawala), specialized trading centers
(funduq) and private banks (ma'una) (see Kramers, 1934:102).
Crusades
The crusades that took place from 1092 to 1292 were a long time for Europe to use to
gain knowledge from the Islamic world. According to Ferruollo, during this period the
Muslim community helped shape European attitudes, feelings and values (see Ferruollo,
1984: 42).
Why Europeans do not recognize that Islamic science is big enough to influence the
development of science in Europe, because (1) Europe in medieval times was known to be
very hostile to the Islamic world. This made it difficult for Europeans to accept the
advantages that had been obtained by the Muslim community (Ghanzanfar, 2002:153); and
(2) Scholars at that time borrowing without telling was a common practice, besides property
rights in the 12th century were not yet recognized. In this regard, the Spanish-era priest of the
Domician order, Raymund Martin - who influenced St. Thomas Aquinas - is known to have
sourced his book Pugio Fidei from al Ghazali's Tahafut al-Falasifa, Maqasid ul-Falasifa, al-
Munqid, Mishkat ul-Anwar, and Ihya Ulumuddin, without citing the references (see Sharif,
1966: 1361)).
If traced further, let alone listen back to how the development of Muslim thought about
Islamic economics that already exists (the author described above) which can be traced since
the life of the Prophet Muhammad SAW. Adam Smith was named the father of modern
economics along with the launch of economic thought in a book entitled 'An Inquiry into the
nature causes the wealth of nations'. From Smith's thought, a tradition of scientific thought
was born Classical economics emphasizes the freedom of market mechanisms in measuring
economic activity (laises faire) without being disturbed by government policies.
Adam Smith gave an example of an economically backward society is the Indians in
North America. While an example of an advanced economic society is the Arabs. The Arabs
Adam Smith meant were certainly a nation of traders in the days of the Prophet. Because in
the next explanation he said that the nation led by Muhammad and the generations after him.
From Adam Smith's explanation, it is clear that he recognized the superiority and
greatness of the Muslim economy in the past. Therefore, it is likely that he has indirectly
adopted Islamic economic theories. The indication shows that the progress of the Islamic
economy in medieval times was felt in England, Adam Smith's homeland, even long before he
was born. In 774 AD, King Offa in England at that time minted gold coins which were a
direct copy of the Islamic dinar, including its Arabic writing. All The writing on the coin is
Arabic, except on one side it says OFFAREX.
This reality shows that the Islamic dinar was then the strongest currency in the world. In
addition, the Muslim economy was far more advanced than Europe. It showed that Muslim
international trade had reached as far as Northern Europe. In 1764, Adam Smith gave up his
professorship in Glasgow England and chose his new career as economic advisor to the Duke
of Buccleuch. It was during this period that Smith traveled extensively abroad, especially to
France. Here he met many famous philosophers. Smith began writing The Wealth of Nations
while he was in France and completed it in 1766, in Kirdcaldy. And ten years later it was
published, namely in 1776. At that time in Europe there were already translated books by
Muslim economists. In fact, in the South of France, many professors were applying the
teaching patterns they had learned from Muslim countries. The explanation above shows that
the role of Muslim scientists is very significant to the rise of European intellectualism,
including in economic thought.
In the next development of classical economic thought was not always able to solve all
the economic problems that are growing increasingly complex, one proof is the emergence of
a severe depression of the world economy ahead of World War II (malaise period). From here
then inspired the birth of economic thought that emphasizes the need for the role of
government in regulating economic activity. This thinking was pioneered by John Maynard
Keynes who is considered a modern economic figure who developed the idea of short-term
economic analysis to encourage economic growth and overcome the problems of
unemployment and inflation.
Contemporary Islamic economic thought can be categorized into three groups of schools
of thought, namely:
Baqir As-Sadr's School
Mainstream Mazhab
Alternative Mazhab
Baqir As-Sadr's School
Scholars who became pioneers of this school are Baqir as- Sadr and Ali Shariati and
scholars from Iran and Iraq. According to As-Sadr's thinking that in studying economics must
be seen from two aspects, namely aspects of philosophy of economics or normative economics
and aspects of positive economics. An example of positive economics, i.e. studying the theory
of consumption and demand which is a common and acceptable phenomenon by anyone
without being influenced by idiology. Meanwhile, from the aspect of phylosophy of
economics which is the result of human thought, it will be found that each human group has
an idiology, a perspective that is not the same. An example is the discussion of 'justice'.
According to the concept of classical capitalism, what is meant by fairness is that you get
what you deserve, meaning 'you get what you have worked for'. Meanwhile, according to
classical socialism, the meaning of 'fair' is that no one has previlege to get more than others,
meaning that no one gets facilities to get more than others, in other words, everyone gets the
same. But Islam has its own meaning in interpreting 'fair' which is laa tadhlimuuna wa laa
tudhlamuuna meaning not to harm each other. So according to Baqir As-sadr's school of
thought, there is a difference in principle between economics and Islamic ideology, Therefore,
there will never be a common ground between Islam and economics.
Economics states that economic problems arise because of the problem of scarcity of
economic resources (scarcity) compared to human needs which are unlimited. In this case, the
school of Baqir As-Sadr rejects the understanding of economic science because in Islam it has
been confirmed that Allah Swt. has created creatures in this world including humans in the
sufficiency of economic resources as stated in His word:1
َ
َقَلَخَ
وََ
لُكَََ
فٍَءْيَش-َ
ُهَر دَقَََت-َْ
يِدْق-اًر
"...........................................................
.......... And He has created all things, and He has measured them out with precision."
Furthermore, according to the school of Baqir As-Sadr, the main problem faced by all
human beings in this world is the problem of unequal distribution of wealth. How the gift
given by Allah SWT to all creatures including humans can be distributed evenly and
proportionally. According to the school of Baqir As-Sadr to realize this, there are several
steps taken, namely:
replacing the term economics with the term iqtishad which implies that it is harmonious,
equal, and balanced (in between).
compile and reconstruct a separate economic science derived from the Qur'an and
Assunnah.
This is the contribution of Baqir As-sadr's school which is quite significant in the
discourse of the development of Islamic economics.
Mainstream Mazhab
Islamic economic thought from the mainstream school of thought is what gives the most
color in the discourse of Islamic economics now because most of its figures from the Islamic
Development Bank (IDB) which has funding facilities and cooperation networks with various
international institutions. The figures of the mainstream school include M. Umer Chapra, M.
A. Mannan, Nejatullah Siddiqi, Khurshid Ahmad, Monzer Kahf etc. equilibrium. But
relatively at a certain time and in a certain place there will still be a problem of scarcity. So
until here there is no difference between conventional economics and Islamic economics. The
difference is only in the mechanism of solving economic problems that according to the
mainstream school must refer to the Qur'an and Assunnah. While in the view of classical
capitalism the solution through the operation of the market mechanism, and classical
socialism through a centralized planning system.
Alternative Mazhab
In contrast to the views of the two previous schools, the alternative school sees that
Baqir as-Sadr's school of thought tries to explore and find a new Islamic economic paradigm
by leaving the conventional economic paradigm. While the mainstream school is considered
to be another face of the neoclassical view by eliminating the element of interest and adding
zakat.
The alternative school led by Prof. Timjur Kura (Chair of the Economics Department at
the University of Southern California), Prof. Jomo and Prof. Muhammad Arief contributes
through critical analysis of economics not only on the views of capitalism and socialism but
also criticizes the development of economic discourse. Islamic economic discourse. They
Islam is a view or ideology that is absolute truth that talks about Islamic economics means
studying human thinking about the verses of God and the sunnah of the Prophet in the
economic aspect. So according to this alternative school of Islamic economics is a
discourse that can still be debated because it is a human interpretation of the Qur'an
and Assunnah that needs to be tested and studied continuously.
Actually there is still one more Islamic economic discourse that is also beginning to
develop in the Islamic world, namely the thought of implementing a gold currency system as
a substitute for paper currency. (which was driven by Dr. Umar Vadillo and the Hisbut Tahrir
activist group) as happened / used during the Abbasid reign, namely the dinar and dirham
(gold and silver) currencies.
However, their thoughts cannot be included in a separate school of thought because they
are relative It is still premature and has not been supported by theoretical foundations and
empirical tests in the context of modern life. Moreover, in economic practice in the field it is
over valued so that instead a currency made of copper called "fulus" was created. Ibn
Taymiyah said: "There is no problem with money not coming from gold and silver as long as
the government is able to maintain its value". Al-Maghribi stated: "If the government prints
money continuously, it means that the government does not maintain the value of the
currency". In another section Ibn Qayyim warned: "If the government continuously prints
money, it can cause usury khafi (hidden usury) in the community, namely usury framed by
buying and selling transactions". This is in accordance with the meaning of the Hadith of the
Prophet, namely "There will come a time when people legalize usury by means of buying
and selling".
Muhammad Nejatullah Siddiqi in his book "Reading in Islamic Economic Thought"
explains the history of Islamic economic thought in four phases, namely:
Phase I: 113 H-451 H/731 M- 1058 M.
Phase II: 450 H-850 H / 1058 M-1446 M.
Phase III: 850 H-1350 H / 1446 M-1932 M.
Phase IV: 1932 AD-present.
In the first phase, it is known that there were 15 Muslim economists who actually
contributed to the development of economic thought, while at the same time there were no
economists from mainland Europe. Known at that time figures such as Abu Yusuf,
Muhammad bin Hasan al-Ahaibani, Harist bin Asan al-Muhadibi, Zaid bin Ali Zainal Abidin
bin Hussein bin Ali bin Abi Talib, Junaid Baghdadi, Ibn Miskawaih, Mawardi, etc.
The discourse that developed at that time was macroeconomic thinking concerning
fiscal policy and state finances as reported in Abu Yusuf's book of Al- Kharaj, which is a
book that is written by Abu Yusuf explains the mechanism for imposing taxes on land. Then
also Abu Ubaid in the book Al-Amwal describes how the management of state finances and
the state budget. In the book Al-Ahkam Al-Sulthaniyah by Mawardi discusses more about the
problem of government administration. And by other Islamic economic thinkers have also
been touched on the operation of unfair market mechanisms.
In the second phase of the development of Islamic economic thought, the discourse on
economics intensively began to develop even though on the other hand it was characterized
by changes in the structure of Islamic power which was getting wider. Several major figures
came to the fore such as Imam Al-Ghozali, Ibn Taymiyah, Ibn Khaldun, Ibn Qayyim. In this
second phase, the scientific discourse was directed more towards microeconomic analysis and
the function of money.
Imam Al-Ghozali addressed the issue of money and its functions. According to Imam
Al-Ghazali, it is not a problem to apply a non-gold and silver currency as long as the
government is able to maintain the stability of the currency as a legal tender. In one of his
writings he said "Money is like a mirror, colorless but can reflect all colors" and he also said
"If money has been traded, then it is the same as imprisoning the function of money", so that if
that happens it will cause depreciation of the currency exchange rate against other currencies.
He also explained about the prohibition of usury fadhl and its impact on the economy. Al-
Ghozali's intensive economic studies also touched on the issue of scales, price control (market
intervention), determination of taxes in an emergency, etc. In some parts of his thought also
touches on how the market mechanism works through the power of demand and supply.
(supply) in determining the market equilibrium.
An example of how to overcome the impact of price increases in order to stabilize
market prices is reflected in the government of Umar bin Khatab when there was inflation
caused by crop failure in the Hijaz area as the center of wheat production. The policy applied
by the government at that time to overcome it was through the market mechanism by
increasing the supply of wheat imported from Fuztadz Egypt so that prices returned to normal.
Conversely, if inflation is caused by market distortions such as monopolistic practices
and market hoarding, then the solution applied is not not by using the market mechanism but
through government intervention. Ibn Taymiyah has long suggested that the government
needs to conduct price intervention at the original equilibrium price to break the behavior of
monopolists and hoarding of goods. In contrast to government intervention, the views of
conventional economists suggest that Price fixing is done at the ceiling price or at the floor
price. Then what about the Prophet's hadith regarding the issue of price increases in Medina at
that time, namely "Allah is the one who determines prices. It is Allah who determines
provision and it is Allah who withholds provision". Apparently it was this hadith that later
inspired some economists to conceptualize the operation of the market mechanism by the
invisible hand. If so, is the proposition put forward by Ibn Taymiyyah regarding price
intervention contrary to the intent of the Prophet's hadith above? The answer is no! because
the direction and purpose of government intervention is so that the equilibrium price in the
market returns to the initial equilibrium position (equilibrium).
The third phase was a period of the rise of European civilization. At that time, 22
economists emerged while at the same time there were only a few Muslim scholars, namely
the Shah of Islam waliAllah with his work Hujjah Allah Al-Balighah which explains how the
provisions of sharia in relation to the behavior of an individual and the arrangement of social
organizations, other scholars are Muhammad Iqbal and Jamaluddin Al- Afghani.
We are familiar with the famous European economists such as JS Mill, Alfred Marshal
who formed the classical capitalist school. Behind them came the names of Karl Marx, Lenin
who gave birth to the socialist school. Then came JM Keynes with his Neo Classical school.
In this phase, economic thought from the West really dominated the world until now.
Meanwhile, Muslim scholars continue to experience moral and intellectual decline so that
most Islamic countries become colonies of western countries.
The fourth phase was characterized by the emergence of a new consciousness among
Muslims. A moral and intellectual awakening among Muslims gave birth to several names
such as Sayyid Qutb, Al- Maududi and Yusuf Qardhawi. However, his thoughts are more
inclined to the approach of fiqh, including the work of scientist Abu al- A'la al-Maududi from
Pakistan. It was not until a decade later that scientific works on Islamic economics began to
appear, especially after the first world conference of Muslims in Mecca in 1976 with the main
theme of Islamic economics (Qardhawi, 1997: 20-21).
Like a sleeping person, the study of Islamic economics as a science at the end of the
1970s was like stumbling awake, and this awakening seems to be related to the trends that
occurred in the world due to the economic crisis of 1974, with the birth of what is called the
flow or monetarist thinking, which further consensus Keynesian began to be abandoned
because it was considered no longer able to overcome the problems of contemporary
economics, this tendency is getting stronger after the collapse of Russia's socialist-communist
economy.
From 1980 until now, the awareness of Muslim thought developed quite rapidly, marked
by the emergence of three schools of Muslim thought, namely the Baqir As-Sadr school
(iqtishoduna), the mainstream school and the alternative school. In this phase, several
prominent names emerged such as MA. Mannan, Annas Zarka, Khurshid Ahmad, Nejatullah
Siddiqi, Hasanus Zaman, etc.
From research conducted by Umer Chapra, for example, it can be seen that the capitalist
economic system that relies on market mechanisms has failed to realize its goals, both
positive goals and normative goals.3 Similar failures achieving 'efficient and fair' economic
activity in the process of allocation and distribution of limited resources. While normative
goals are universal goals based on certain norms from all socio-economic aspects such as fair
income distribution, optimal growth rates etc. that are structured based on religious norms
also experienced by the socialist economic system. Actually, the purpose of the socialist
economic system is to correct various problems found in the capitalist economic system, so
that one of the goals of this socialist economic system is the creation of shared prosperity,
where with the implementation of the system there will no longer be various social classes in
society, economic equality occurs, and society will be free from all kinds of tyranny. This
goal turned out to be a failure, because the designers of the system did not understand what
human beings really meant. In this system, people were treated as cogs in a machine called
the state rather than a system built on the spontaneous and voluntary interactions of individual
economic actors.
Therefore, the development of Islamic economics as an alternative system is very
necessary, and with this alternative economic system the goal of economic activity to achieve
maqosidus shar'iah, which is an effort to improve the quality of economic activity to improve
the welfare of all human beings can be realized. The religious moral element is thus part of
the Islamic economic theory itself, and the Islamic economic mechanism to achieve prosperity
efficiently is built through the values of justice, equity and the development of the fiscal
sector in encouraging economic dynamics.
Conclusion
The above quote shows that Islamic economic thought in classical times was very
advanced and developed before Western scientists discussed it in the 18th-19th centuries. This
fact must be considered by contemporary economists, not only Muslim economists but also
non-Muslim economists around the world. Contribution of Islamic Economics to Modern
Economics In the past three decades, the study and research of Islamic economics has
flourished again. Various international forums on Islamic economics have been held
frequently and widely in various countries, such as conferences seminars, symposiums and
workshops. Dozens of doctors and professors of Islamic economics who are experts in both
conventional and shari'ah economics, appear as speakers in these forums. From their study,
they found that Islamic economic theory is actually not a new science or a science that is
fundamentally derived from modern economic theory that is developing today. Historical
facts show that classical Islamic scientists are the inventors and founders of all scientific
fields, including economics.
Circumstances in each period
There were several circumstances that resulted in the period of khulafa' al- rashidun not
many economists were born, including (1) Al Quran and al Hadith become the main source in
running people's lives. (2) The dominance of policy is more influenced by the attitude of the
leader as a representation of the successor to the Prophet Muhammad. This makes the caliph's
decision a reference in carrying out activities in the social field. (3) The scientific capacity of
each caliph is not the same, the period of leadership of the caliph is relatively different and the
end of his power 3 caliphs ended in political tragedy;. Abu Bakar's caliphate lasted for 2
years, 3 months, 11 days. Umar bin Khattab held the caliphate for 10 years, 6 months, 5 days.
Usman bin Affan ruled for 12 years less 12 days, and Ali bin Abi Talib ruled for 5 years and 3
months (Ahmad, 2000:12). (4) There has not been much friction thought with the Byzantine
(Greek) and Sasanian (Persian) scientific mainstream, because the mastery of Greece and
Persia has not yet reached the process of assimilating scientific potential (see Hodgson, 1999:
287).
While there were not many Muslim thinkers in the field of economics during the
Ummayah dynasty due to, among others; (1) The leader's busyness in expanding new
territories which was quite labor and time consuming. (2) The government system tended to
be Arab-centric, the Arab style was very dominant in the bureaucratic system during the
Ummayah dynasty. Non-Arabs - consisting of Persian descendants - commonly called mawali
were treated as second-class citizens. This situation affected the dialectic between the
bureaucracy and the Persians, in fact, as the more educated people were not so good. (3)
Geographically, Damascus, the capital of the Ummayah dynasty consisted mostly of Arabs, so
it was far from the interaction of the outside world, in contrast to Bagdad, the capital of the
Abbasid dynasty, which was close to Cteshipon, the former capital of the Sassanid empire,
Persia. (see Saefudin, 2002: 30-31)
While progress Islamic thought at period dynasty Abbasid dynasty was caused by; (1)
The contact between Islam and Persia became the development of science and philosophy
because Persia culturally played a major role in the development of the Greek scientific
tradition. (2) There was a great deal of activity in translating Greek literature into Arabic.
According to Mehdi Nakosteen, the translation movement was influenced by the previous
translation movement carried out during the Sassanid Empire, which was centered at the
Jundishapur Academy. This academy was the center for translating Greek and Hindu works of
science and philosophy into Pahlavi. From this school also came some important translations
from Sanskrit, Pahlavi and Syriac into Arabic. (Nakosteen, 1964:33) (3) The relative absence
of territorial clearances and rebellions ensured the stability of the government so that the
government's concentration on promoting intellectual aspects found opportunities. (4) The
existence of heterogeneous civilizations and cultures in Baghdad led to a process of
interaction between one culture and another; Arab, Greek, Persian, and Hindu which had an
impact on intellectual development. Bagdad was also inhabited by the rest of the population
native Chaldaeans and Suryani. (5) Bagdad was considered strategic and profitable because it
was passed by the Tigris and Euphrates rivers. (Saefuddin, 2002: 149) Goods can go in and
out through the river using boats so that Bagdad becomes a bustling economic satellite with
commodities being traded.
Then, the science of economics during the Ummayah or Abbasid era is certainly not as
familiar today. From the above historical developments we can note that (1) Economics is an
integral part of the political, social and cultural life of Islamic society so that economic
thought in the work of Muslim thinkers is difficult to separate from political and cultural
thought. This can be proven by the number of books written by Muslim thinkers who unite
economic problems with social, political and cultural problems. (2) Muslim thinkers are
known as Muslim economists because they have documented works through written works
that can be accessed by generations after him, and or known because there are students of the
Muslim thinker who documented his economic his economic thought. (3) Every Muslim
thinker expresses economic or social, political and cultural issues influenced by the
background of each Muslim thinker's life; residence, country, occupation and others.
The development of Muslim economic thought in Europe
The development of knowledge in the Islamic world influenced the progress of thought
in the European world. The influence to Europe is through several ways as follows:
Travels.
During the 11th and early centuries 12 Several Latin-Scholastic European scholars traveled in
several Arab countries to learn Arabic in order to gain knowledge to bring back to Europe.
During this period many students from Italy, Spain and Southern France attended Muslim
studies to learn mathematics, philosophy, medicine, cosmography, and mathematics other
studies in order to be able to teach in Western universities-which were established after the
studies in the Muslim world (Sharif, 1966:1367).
Translation.
From the 11th to the 14th century, there was a great deal of translation from Arabic to
Latin, not only of Arabic writing, but from Arabic to Hebrew. This was done in Spain, Italy
and France. Some notable translators are known from medieval history such as Adelard of
Bath, Constantine the African, Michael the Sct, Herman the German, Dominic Gundisilavi,
John of Seville, Plato of Trivoli, William of Luna, Gerard of Cremona, and Aflred of Sareshel
(Durant, 1950:910) According to Crombie during the Middle Ages, the translation of Arabic
into Latin was a major undertaking 14th and 15th centuries, Scholastic Europe was also not
directly influenced by the legacy of European thinkers, they still used the knowledge of
Muslim thinkers (see Crombie, 1963: 30).
Oral Tradition
Other important influential sources in the oral tradition are insufficiently available.
According to Chejne that specifically for Oral tradition is an important factor, and this is
evidenced by the literary relationship between the Arabs and the West. According to Chejne,
oral transmission took place over a long period of time and relations were maintained between
Muslims and Christians by being bilingual in Spanish. (see Chejne, 1980:111)
Trade
Some authors point out that trade brought the Arab world through Russian roads to
Polania, the Baltic, Scadinavia, central-western Europe and Iceland. Through trade resulting
in the spread of economic institutions, Arab money was used in the Christian Kingdom of the
North, where there had been no coins for 400 years. (see Hitti, 1943:144)
Diffusion and Institutions
Udovich reports that by the 15th century, there were already various contracts of trust
and partnership between Venetians and Arab merchants in Alexandria. These contractual
forms originated in the Islamic world and eventually spread in Latin Europe through contact
with Muslim scholars and scholars legal experts. Then, the emergence of various forms of
instruments and institutions facilitating the development of commerce and trade in Europe,
such as bills of exchange (siftajah), letters of credit (hawala), specialized trading centers
(funduq) and private banks (ma'una) (see Kramers, 1934:102).
Crusades
The crusades that took place from 1092 to 1292 were a long time for Europe to use to
gain knowledge from the Islamic world. According to Ferruollo, during this period the
Muslim community helped shape European attitudes, feelings and values (see Ferruollo,
1984: 42).
Why Europeans do not recognize that Islamic science is big enough to influence the
development of science in Europe, because (1) Europe in medieval times was known to be
very hostile to the Islamic world. This made it difficult for Europeans to accept the
advantages that had been obtained by the Muslim community (Ghanzanfar, 2002:153); and
(2) Scholars at that time borrowing without telling was a common practice, besides property
rights in the 12th century were not yet recognized. In this regard, the Spanish-era priest of the
Domician order, Raymund Martin - who influenced St. Thomas Aquinas - is known to have
sourced his book Pugio Fidei from al Ghazali's Tahafut al-Falasifa, Maqasid ul-Falasifa, al-
Munqid, Mishkat ul-Anwar, and Ihya Ulumuddin, without citing the references (see Sharif,
1966: 1361)).
If traced further, let alone listen back to how the development of Muslim thought about
Islamic economics that already exists (the author described above) which can be traced since
the life of the Prophet Muhammad SAW. Adam Smith was named the father of modern
economics along with the launch of economic thought in a book entitled 'An Inquiry into the
nature causes the wealth of nations'. From Smith's thought, a tradition of scientific thought
was born Classical economics emphasizes the freedom of market mechanisms in measuring
economic activity (laises faire) without being disturbed by government policies.
Adam Smith gave an example of an economically backward society is the Indians in
North America. While an example of an advanced economic society is the Arabs. The Arabs
Adam Smith meant were certainly a nation of traders in the days of the Prophet. Because in
the next explanation he said that the nation led by Muhammad and the generations after him.
From Adam Smith's explanation, it is clear that he recognized the superiority and
greatness of the Muslim economy in the past. Therefore, it is likely that he has indirectly
adopted Islamic economic theories. The indication shows that the progress of the Islamic
economy in medieval times was felt in England, Adam Smith's homeland, even long before he
was born. In 774 AD, King Offa in England at that time minted gold coins which were a
direct copy of the Islamic dinar, including its Arabic writing. All The writing on the coin is
Arabic, except on one side it says OFFAREX.
This reality shows that the Islamic dinar was then the strongest currency in the world. In
addition, the Muslim economy was far more advanced than Europe. It showed that Muslim
international trade had reached as far as Northern Europe. In 1764, Adam Smith gave up his
professorship in Glasgow England and chose his new career as economic advisor to the Duke
of Buccleuch. It was during this period that Smith traveled extensively abroad, especially to
France. Here he met many famous philosophers. Smith began writing The Wealth of Nations
while he was in France and completed it in 1766, in Kirdcaldy. And ten years later it was
published, namely in 1776. At that time in Europe there were already translated books by
Muslim economists. In fact, in the South of France, many professors were applying the
teaching patterns they had learned from Muslim countries. The explanation above shows that
the role of Muslim scientists is very significant to the rise of European intellectualism,
including in economic thought.
In the next development of classical economic thought was not always able to solve all
the economic problems that are growing increasingly complex, one proof is the emergence of
a severe depression of the world economy ahead of World War II (malaise period). From here
then inspired the birth of economic thought that emphasizes the need for the role of
government in regulating economic activity. This thinking was pioneered by John Maynard
Keynes who is considered a modern economic figure who developed the idea of short-term
economic analysis to encourage economic growth and overcome the problems of
unemployment and inflation.
Contemporary Islamic economic thought can be categorized into three groups of schools
of thought, namely:
Baqir As-Sadr's School
Mainstream Mazhab
Alternative Mazhab
Baqir As-Sadr's School
Scholars who became pioneers of this school are Baqir as- Sadr and Ali Shariati and
scholars from Iran and Iraq. According to As-Sadr's thinking that in studying economics must
be seen from two aspects, namely aspects of philosophy of economics or normative economics
and aspects of positive economics. An example of positive economics, i.e. studying the theory
of consumption and demand which is a common and acceptable phenomenon by anyone
without being influenced by idiology. Meanwhile, from the aspect of phylosophy of
economics which is the result of human thought, it will be found that each human group has
an idiology, a perspective that is not the same. An example is the discussion of 'justice'.
According to the concept of classical capitalism, what is meant by fairness is that you get
what you deserve, meaning 'you get what you have worked for'. Meanwhile, according to
classical socialism, the meaning of 'fair' is that no one has previlege to get more than others,
meaning that no one gets facilities to get more than others, in other words, everyone gets the
same. But Islam has its own meaning in interpreting 'fair' which is laa tadhlimuuna wa laa
tudhlamuuna meaning not to harm each other. So according to Baqir As-sadr's school of
thought, there is a difference in principle between economics and Islamic ideology, Therefore,
there will never be a common ground between Islam and economics.
Economics states that economic problems arise because of the problem of scarcity of
economic resources (scarcity) compared to human needs which are unlimited. In this case, the
school of Baqir As-Sadr rejects the understanding of economic science because in Islam it has
been confirmed that Allah Swt. has created creatures in this world including humans in the
sufficiency of economic resources as stated in His word:1
َ
َقَلَخَ
وََ
لُكَََ
فٍَءْيَش-َ
ُهَر دَقَََت-َْ
يِدْق-اًر
"...........................................................
.......... And He has created all things, and He has measured them out with precision."
Furthermore, according to the school of Baqir As-Sadr, the main problem faced by all
human beings in this world is the problem of unequal distribution of wealth. How the gift
given by Allah SWT to all creatures including humans can be distributed evenly and
proportionally. According to the school of Baqir As-Sadr to realize this, there are several
steps taken, namely:
replacing the term economics with the term iqtishad which implies that it is harmonious,
equal, and balanced (in between).
compile and reconstruct a separate economic science derived from the Qur'an and
Assunnah.
This is the contribution of Baqir As-sadr's school which is quite significant in the
discourse of the development of Islamic economics.
Mainstream Mazhab
Islamic economic thought from the mainstream school of thought is what gives the most
color in the discourse of Islamic economics now because most of its figures from the Islamic
Development Bank (IDB) which has funding facilities and cooperation networks with various
international institutions. The figures of the mainstream school include M. Umer Chapra, M.
A. Mannan, Nejatullah Siddiqi, Khurshid Ahmad, Monzer Kahf etc. equilibrium. But
relatively at a certain time and in a certain place there will still be a problem of scarcity. So
until here there is no difference between conventional economics and Islamic economics. The
difference is only in the mechanism of solving economic problems that according to the
mainstream school must refer to the Qur'an and Assunnah. While in the view of classical
capitalism the solution through the operation of the market mechanism, and classical
socialism through a centralized planning system.
Alternative Mazhab
In contrast to the views of the two previous schools, the alternative school sees that
Baqir as-Sadr's school of thought tries to explore and find a new Islamic economic paradigm
by leaving the conventional economic paradigm. While the mainstream school is considered
to be another face of the neoclassical view by eliminating the element of interest and adding
zakat.
The alternative school led by Prof. Timjur Kura (Chair of the Economics Department at
the University of Southern California), Prof. Jomo and Prof. Muhammad Arief contributes
through critical analysis of economics not only on the views of capitalism and socialism but
also criticizes the development of economic discourse. Islamic economic discourse. They
Islam is a view or ideology that is absolute truth that talks about Islamic economics means
studying human thinking about the verses of God and the sunnah of the Prophet in the
economic aspect. So according to this alternative school of Islamic economics is a
discourse that can still be debated because it is a human interpretation of the Qur'an
and Assunnah that needs to be tested and studied continuously.
Actually there is still one more Islamic economic discourse that is also beginning to
develop in the Islamic world, namely the thought of implementing a gold currency system as
a substitute for paper currency. (which was driven by Dr. Umar Vadillo and the Hisbut Tahrir
activist group) as happened / used during the Abbasid reign, namely the dinar and dirham
(gold and silver) currencies.
However, their thoughts cannot be included in a separate school of thought because they
are relative It is still premature and has not been supported by theoretical foundations and
empirical tests in the context of modern life. Moreover, in economic practice in the field it is
over valued so that instead a currency made of copper called "fulus" was created. Ibn
Taymiyah said: "There is no problem with money not coming from gold and silver as long as
the government is able to maintain its value". Al-Maghribi stated: "If the government prints
money continuously, it means that the government does not maintain the value of the
currency". In another section Ibn Qayyim warned: "If the government continuously prints
money, it can cause usury khafi (hidden usury) in the community, namely usury framed by
buying and selling transactions". This is in accordance with the meaning of the Hadith of the
Prophet, namely "There will come a time when people legalize usury by means of buying
and selling".
Muhammad Nejatullah Siddiqi in his book "Reading in Islamic Economic Thought"
explains the history of Islamic economic thought in four phases, namely:
Phase I: 113 H-451 H/731 M- 1058 M.
Phase II: 450 H-850 H / 1058 M-1446 M.
Phase III: 850 H-1350 H / 1446 M-1932 M.
Phase IV: 1932 AD-present.
In the first phase, it is known that there were 15 Muslim economists who actually
contributed to the development of economic thought, while at the same time there were no
economists from mainland Europe. Known at that time figures such as Abu Yusuf,
Muhammad bin Hasan al-Ahaibani, Harist bin Asan al-Muhadibi, Zaid bin Ali Zainal Abidin
bin Hussein bin Ali bin Abi Talib, Junaid Baghdadi, Ibn Miskawaih, Mawardi, etc.
The discourse that developed at that time was macroeconomic thinking concerning
fiscal policy and state finances as reported in Abu Yusuf's book of Al- Kharaj, which is a
book that is written by Abu Yusuf explains the mechanism for imposing taxes on land. Then
also Abu Ubaid in the book Al-Amwal describes how the management of state finances and
the state budget. In the book Al-Ahkam Al-Sulthaniyah by Mawardi discusses more about the
problem of government administration. And by other Islamic economic thinkers have also
been touched on the operation of unfair market mechanisms.
In the second phase of the development of Islamic economic thought, the discourse on
economics intensively began to develop even though on the other hand it was characterized
by changes in the structure of Islamic power which was getting wider. Several major figures
came to the fore such as Imam Al-Ghozali, Ibn Taymiyah, Ibn Khaldun, Ibn Qayyim. In this
second phase, the scientific discourse was directed more towards microeconomic analysis and
the function of money.
Imam Al-Ghozali addressed the issue of money and its functions. According to Imam
Al-Ghazali, it is not a problem to apply a non-gold and silver currency as long as the
government is able to maintain the stability of the currency as a legal tender. In one of his
writings he said "Money is like a mirror, colorless but can reflect all colors" and he also said
"If money has been traded, then it is the same as imprisoning the function of money", so that if
that happens it will cause depreciation of the currency exchange rate against other currencies.
He also explained about the prohibition of usury fadhl and its impact on the economy. Al-
Ghozali's intensive economic studies also touched on the issue of scales, price control (market
intervention), determination of taxes in an emergency, etc. In some parts of his thought also
touches on how the market mechanism works through the power of demand and supply.
(supply) in determining the market equilibrium.
An example of how to overcome the impact of price increases in order to stabilize
market prices is reflected in the government of Umar bin Khatab when there was inflation
caused by crop failure in the Hijaz area as the center of wheat production. The policy applied
by the government at that time to overcome it was through the market mechanism by
increasing the supply of wheat imported from Fuztadz Egypt so that prices returned to normal.
Conversely, if inflation is caused by market distortions such as monopolistic practices
and market hoarding, then the solution applied is not not by using the market mechanism but
through government intervention. Ibn Taymiyah has long suggested that the government
needs to conduct price intervention at the original equilibrium price to break the behavior of
monopolists and hoarding of goods. In contrast to government intervention, the views of
conventional economists suggest that Price fixing is done at the ceiling price or at the floor
price. Then what about the Prophet's hadith regarding the issue of price increases in Medina at
that time, namely "Allah is the one who determines prices. It is Allah who determines
provision and it is Allah who withholds provision". Apparently it was this hadith that later
inspired some economists to conceptualize the operation of the market mechanism by the
invisible hand. If so, is the proposition put forward by Ibn Taymiyyah regarding price
intervention contrary to the intent of the Prophet's hadith above? The answer is no! because
the direction and purpose of government intervention is so that the equilibrium price in the
market returns to the initial equilibrium position (equilibrium).
The third phase was a period of the rise of European civilization. At that time, 22
economists emerged while at the same time there were only a few Muslim scholars, namely
the Shah of Islam waliAllah with his work Hujjah Allah Al-Balighah which explains how the
provisions of sharia in relation to the behavior of an individual and the arrangement of social
organizations, other scholars are Muhammad Iqbal and Jamaluddin Al- Afghani.
We are familiar with the famous European economists such as JS Mill, Alfred Marshal
who formed the classical capitalist school. Behind them came the names of Karl Marx, Lenin
who gave birth to the socialist school. Then came JM Keynes with his Neo Classical school.
In this phase, economic thought from the West really dominated the world until now.
Meanwhile, Muslim scholars continue to experience moral and intellectual decline so that
most Islamic countries become colonies of western countries.
The fourth phase was characterized by the emergence of a new consciousness among
Muslims. A moral and intellectual awakening among Muslims gave birth to several names
such as Sayyid Qutb, Al- Maududi and Yusuf Qardhawi. However, his thoughts are more
inclined to the approach of fiqh, including the work of scientist Abu al- A'la al-Maududi from
Pakistan. It was not until a decade later that scientific works on Islamic economics began to
appear, especially after the first world conference of Muslims in Mecca in 1976 with the main
theme of Islamic economics (Qardhawi, 1997: 20-21).
Like a sleeping person, the study of Islamic economics as a science at the end of the
1970s was like stumbling awake, and this awakening seems to be related to the trends that
occurred in the world due to the economic crisis of 1974, with the birth of what is called the
flow or monetarist thinking, which further consensus Keynesian began to be abandoned
because it was considered no longer able to overcome the problems of contemporary
economics, this tendency is getting stronger after the collapse of Russia's socialist-communist
economy.
From 1980 until now, the awareness of Muslim thought developed quite rapidly, marked
by the emergence of three schools of Muslim thought, namely the Baqir As-Sadr school
(iqtishoduna), the mainstream school and the alternative school. In this phase, several
prominent names emerged such as MA. Mannan, Annas Zarka, Khurshid Ahmad, Nejatullah
Siddiqi, Hasanus Zaman, etc.
From research conducted by Umer Chapra, for example, it can be seen that the capitalist
economic system that relies on market mechanisms has failed to realize its goals, both
positive goals and normative goals.3 Similar failures achieving 'efficient and fair' economic
activity in the process of allocation and distribution of limited resources. While normative
goals are universal goals based on certain norms from all socio-economic aspects such as fair
income distribution, optimal growth rates etc. that are structured based on religious norms
also experienced by the socialist economic system. Actually, the purpose of the socialist
economic system is to correct various problems found in the capitalist economic system, so
that one of the goals of this socialist economic system is the creation of shared prosperity,
where with the implementation of the system there will no longer be various social classes in
society, economic equality occurs, and society will be free from all kinds of tyranny. This
goal turned out to be a failure, because the designers of the system did not understand what
human beings really meant. In this system, people were treated as cogs in a machine called
the state rather than a system built on the spontaneous and voluntary interactions of individual
economic actors.
Therefore, the development of Islamic economics as an alternative system is very
necessary, and with this alternative economic system the goal of economic activity to achieve
maqosidus shar'iah, which is an effort to improve the quality of economic activity to improve
the welfare of all human beings can be realized. The religious moral element is thus part of
the Islamic economic theory itself, and the Islamic economic mechanism to achieve prosperity
efficiently is built through the values of justice, equity and the development of the fiscal
sector in encouraging economic dynamics.
Conclusion
The above quote shows that Islamic economic thought in classical times was very
advanced and developed before Western scientists discussed it in the 18th-19th centuries. This
fact must be considered by contemporary economists, not only Muslim economists but also
non-Muslim economists around the world. Contribution of Islamic Economics to Modern
Economics In the past three decades, the study and research of Islamic economics has
flourished again. Various international forums on Islamic economics have been held
frequently and widely in various countries, such as conferences seminars, symposiums and
workshops. Dozens of doctors and professors of Islamic economics who are experts in both
conventional and shari'ah economics, appear as speakers in these forums. From their study,
they found that Islamic economic theory is actually not a new science or a science that is
fundamentally derived from modern economic theory that is developing today. Historical
facts show that classical Islamic scientists are the inventors and founders of all scientific
fields, including economics.
Circumstances in each period
There were several circumstances that resulted in the period of khulafa' al- rashidun not
many economists were born, including (1) Al Quran and al Hadith become the main source in
running people's lives. (2) The dominance of policy is more influenced by the attitude of the
leader as a representation of the successor to the Prophet Muhammad. This makes the caliph's
decision a reference in carrying out activities in the social field. (3) The scientific capacity of
each caliph is not the same, the period of leadership of the caliph is relatively different and the
end of his power 3 caliphs ended in political tragedy;. Abu Bakar's caliphate lasted for 2
years, 3 months, 11 days. Umar bin Khattab held the caliphate for 10 years, 6 months, 5 days.
Usman bin Affan ruled for 12 years less 12 days, and Ali bin Abi Talib ruled for 5 years and 3
months (Ahmad, 2000:12). (4) There has not been much friction thought with the Byzantine
(Greek) and Sasanian (Persian) scientific mainstream, because the mastery of Greece and
Persia has not yet reached the process of assimilating scientific potential (see Hodgson, 1999:
287).
While there were not many Muslim thinkers in the field of economics during the
Ummayah dynasty due to, among others; (1) The leader's busyness in expanding new
territories which was quite labor and time consuming. (2) The government system tended to
be Arab-centric, the Arab style was very dominant in the bureaucratic system during the
Ummayah dynasty. Non-Arabs - consisting of Persian descendants - commonly called mawali
were treated as second-class citizens. This situation affected the dialectic between the
bureaucracy and the Persians, in fact, as the more educated people were not so good. (3)
Geographically, Damascus, the capital of the Ummayah dynasty consisted mostly of Arabs, so
it was far from the interaction of the outside world, in contrast to Bagdad, the capital of the
Abbasid dynasty, which was close to Cteshipon, the former capital of the Sassanid empire,
Persia. (see Saefudin, 2002: 30-31)
While progress Islamic thought at period dynasty Abbasid dynasty was caused by; (1)
The contact between Islam and Persia became the development of science and philosophy
because Persia culturally played a major role in the development of the Greek scientific
tradition. (2) There was a great deal of activity in translating Greek literature into Arabic.
According to Mehdi Nakosteen, the translation movement was influenced by the previous
translation movement carried out during the Sassanid Empire, which was centered at the
Jundishapur Academy. This academy was the center for translating Greek and Hindu works of
science and philosophy into Pahlavi. From this school also came some important translations
from Sanskrit, Pahlavi and Syriac into Arabic. (Nakosteen, 1964:33) (3) The relative absence
of territorial clearances and rebellions ensured the stability of the government so that the
government's concentration on promoting intellectual aspects found opportunities. (4) The
existence of heterogeneous civilizations and cultures in Baghdad led to a process of
interaction between one culture and another; Arab, Greek, Persian, and Hindu which had an
impact on intellectual development. Bagdad was also inhabited by the rest of the population
native Chaldaeans and Suryani. (5) Bagdad was considered strategic and profitable because it
was passed by the Tigris and Euphrates rivers. (Saefuddin, 2002: 149) Goods can go in and
out through the river using boats so that Bagdad becomes a bustling economic satellite with
commodities being traded.
Then, the science of economics during the Ummayah or Abbasid era is certainly not as
familiar today. From the above historical developments we can note that (1) Economics is an
integral part of the political, social and cultural life of Islamic society so that economic
thought in the work of Muslim thinkers is difficult to separate from political and cultural
thought. This can be proven by the number of books written by Muslim thinkers who unite
economic problems with social, political and cultural problems. (2) Muslim thinkers are
known as Muslim economists because they have documented works through written works
that can be accessed by generations after him, and or known because there are students of the
Muslim thinker who documented his economic his economic thought. (3) Every Muslim
thinker expresses economic or social, political and cultural issues influenced by the
background of each Muslim thinker's life; residence, country, occupation and others.
The development of Muslim economic thought in Europe
The development of knowledge in the Islamic world influenced the progress of thought
in the European world. The influence to Europe is through several ways as follows:
Travels.
During the 11th and early centuries 12 Several Latin-Scholastic European scholars traveled in
several Arab countries to learn Arabic in order to gain knowledge to bring back to Europe.
During this period many students from Italy, Spain and Southern France attended Muslim
studies to learn mathematics, philosophy, medicine, cosmography, and mathematics other
studies in order to be able to teach in Western universities-which were established after the
studies in the Muslim world (Sharif, 1966:1367).
Translation.
From the 11th to the 14th century, there was a great deal of translation from Arabic to
Latin, not only of Arabic writing, but from Arabic to Hebrew. This was done in Spain, Italy
and France. Some notable translators are known from medieval history such as Adelard of
Bath, Constantine the African, Michael the Sct, Herman the German, Dominic Gundisilavi,
John of Seville, Plato of Trivoli, William of Luna, Gerard of Cremona, and Aflred of Sareshel
(Durant, 1950:910) According to Crombie during the Middle Ages, the translation of Arabic
into Latin was a major undertaking 14th and 15th centuries, Scholastic Europe was also not
directly influenced by the legacy of European thinkers, they still used the knowledge of
Muslim thinkers (see Crombie, 1963: 30).
Oral Tradition
Other important influential sources in the oral tradition are insufficiently available.
According to Chejne that specifically for Oral tradition is an important factor, and this is
evidenced by the literary relationship between the Arabs and the West. According to Chejne,
oral transmission took place over a long period of time and relations were maintained between
Muslims and Christians by being bilingual in Spanish. (see Chejne, 1980:111)
Trade
Some authors point out that trade brought the Arab world through Russian roads to
Polania, the Baltic, Scadinavia, central-western Europe and Iceland. Through trade resulting
in the spread of economic institutions, Arab money was used in the Christian Kingdom of the
North, where there had been no coins for 400 years. (see Hitti, 1943:144)
Diffusion and Institutions
Udovich reports that by the 15th century, there were already various contracts of trust
and partnership between Venetians and Arab merchants in Alexandria. These contractual
forms originated in the Islamic world and eventually spread in Latin Europe through contact
with Muslim scholars and scholars legal experts. Then, the emergence of various forms of
instruments and institutions facilitating the development of commerce and trade in Europe,
such as bills of exchange (siftajah), letters of credit (hawala), specialized trading centers
(funduq) and private banks (ma'una) (see Kramers, 1934:102).
Crusades
The crusades that took place from 1092 to 1292 were a long time for Europe to use to
gain knowledge from the Islamic world. According to Ferruollo, during this period the
Muslim community helped shape European attitudes, feelings and values (see Ferruollo,
1984: 42).
Why Europeans do not recognize that Islamic science is big enough to influence the
development of science in Europe, because (1) Europe in medieval times was known to be
very hostile to the Islamic world. This made it difficult for Europeans to accept the
advantages that had been obtained by the Muslim community (Ghanzanfar, 2002:153); and
(2) Scholars at that time borrowing without telling was a common practice, besides property
rights in the 12th century were not yet recognized. In this regard, the Spanish-era priest of the
Domician order, Raymund Martin - who influenced St. Thomas Aquinas - is known to have
sourced his book Pugio Fidei from al Ghazali's Tahafut al-Falasifa, Maqasid ul-Falasifa, al-
Munqid, Mishkat ul-Anwar, and Ihya Ulumuddin, without citing the references (see Sharif,
1966: 1361)).
If traced further, let alone listen back to how the development of Muslim thought about
Islamic economics that already exists (the author described above) which can be traced since
the life of the Prophet Muhammad SAW. Adam Smith was named the father of modern
economics along with the launch of economic thought in a book entitled 'An Inquiry into the
nature causes the wealth of nations'. From Smith's thought, a tradition of scientific thought
was born Classical economics emphasizes the freedom of market mechanisms in measuring
economic activity (laises faire) without being disturbed by government policies.
Adam Smith gave an example of an economically backward society is the Indians in
North America. While an example of an advanced economic society is the Arabs. The Arabs
Adam Smith meant were certainly a nation of traders in the days of the Prophet. Because in
the next explanation he said that the nation led by Muhammad and the generations after him.
From Adam Smith's explanation, it is clear that he recognized the superiority and
greatness of the Muslim economy in the past. Therefore, it is likely that he has indirectly
adopted Islamic economic theories. The indication shows that the progress of the Islamic
economy in medieval times was felt in England, Adam Smith's homeland, even long before he
was born. In 774 AD, King Offa in England at that time minted gold coins which were a
direct copy of the Islamic dinar, including its Arabic writing. All The writing on the coin is
Arabic, except on one side it says OFFAREX.
This reality shows that the Islamic dinar was then the strongest currency in the world. In
addition, the Muslim economy was far more advanced than Europe. It showed that Muslim
international trade had reached as far as Northern Europe. In 1764, Adam Smith gave up his
professorship in Glasgow England and chose his new career as economic advisor to the Duke
of Buccleuch. It was during this period that Smith traveled extensively abroad, especially to
France. Here he met many famous philosophers. Smith began writing The Wealth of Nations
while he was in France and completed it in 1766, in Kirdcaldy. And ten years later it was
published, namely in 1776. At that time in Europe there were already translated books by
Muslim economists. In fact, in the South of France, many professors were applying the
teaching patterns they had learned from Muslim countries. The explanation above shows that
the role of Muslim scientists is very significant to the rise of European intellectualism,
including in economic thought.
In the next development of classical economic thought was not always able to solve all
the economic problems that are growing increasingly complex, one proof is the emergence of
a severe depression of the world economy ahead of World War II (malaise period). From here
then inspired the birth of economic thought that emphasizes the need for the role of
government in regulating economic activity. This thinking was pioneered by John Maynard
Keynes who is considered a modern economic figure who developed the idea of short-term
economic analysis to encourage economic growth and overcome the problems of
unemployment and inflation.
Contemporary Islamic economic thought can be categorized into three groups of schools
of thought, namely:
Baqir As-Sadr's School
Mainstream Mazhab
Alternative Mazhab
Baqir As-Sadr's School
Scholars who became pioneers of this school are Baqir as- Sadr and Ali Shariati and
scholars from Iran and Iraq. According to As-Sadr's thinking that in studying economics must
be seen from two aspects, namely aspects of philosophy of economics or normative economics
and aspects of positive economics. An example of positive economics, i.e. studying the theory
of consumption and demand which is a common and acceptable phenomenon by anyone
without being influenced by idiology. Meanwhile, from the aspect of phylosophy of
economics which is the result of human thought, it will be found that each human group has
an idiology, a perspective that is not the same. An example is the discussion of 'justice'.
According to the concept of classical capitalism, what is meant by fairness is that you get
what you deserve, meaning 'you get what you have worked for'. Meanwhile, according to
classical socialism, the meaning of 'fair' is that no one has previlege to get more than others,
meaning that no one gets facilities to get more than others, in other words, everyone gets the
same. But Islam has its own meaning in interpreting 'fair' which is laa tadhlimuuna wa laa
tudhlamuuna meaning not to harm each other. So according to Baqir As-sadr's school of
thought, there is a difference in principle between economics and Islamic ideology, Therefore,
there will never be a common ground between Islam and economics.
Economics states that economic problems arise because of the problem of scarcity of
economic resources (scarcity) compared to human needs which are unlimited. In this case, the
school of Baqir As-Sadr rejects the understanding of economic science because in Islam it has
been confirmed that Allah Swt. has created creatures in this world including humans in the
sufficiency of economic resources as stated in His word:1
َ
َقَلَخَ
وََ
لُكَََ
فٍَءْيَش-َ
ُهَر دَقَََت-َْ
يِدْق-اًر
"...........................................................
.......... And He has created all things, and He has measured them out with precision."
Furthermore, according to the school of Baqir As-Sadr, the main problem faced by all
human beings in this world is the problem of unequal distribution of wealth. How the gift
given by Allah SWT to all creatures including humans can be distributed evenly and
proportionally. According to the school of Baqir As-Sadr to realize this, there are several
steps taken, namely:
replacing the term economics with the term iqtishad which implies that it is harmonious,
equal, and balanced (in between).
compile and reconstruct a separate economic science derived from the Qur'an and
Assunnah.
This is the contribution of Baqir As-sadr's school which is quite significant in the
discourse of the development of Islamic economics.
Mainstream Mazhab
Islamic economic thought from the mainstream school of thought is what gives the most
color in the discourse of Islamic economics now because most of its figures from the Islamic
Development Bank (IDB) which has funding facilities and cooperation networks with various
international institutions. The figures of the mainstream school include M. Umer Chapra, M.
A. Mannan, Nejatullah Siddiqi, Khurshid Ahmad, Monzer Kahf etc. equilibrium. But
relatively at a certain time and in a certain place there will still be a problem of scarcity. So
until here there is no difference between conventional economics and Islamic economics. The
difference is only in the mechanism of solving economic problems that according to the
mainstream school must refer to the Qur'an and Assunnah. While in the view of classical
capitalism the solution through the operation of the market mechanism, and classical
socialism through a centralized planning system.
Alternative Mazhab
In contrast to the views of the two previous schools, the alternative school sees that
Baqir as-Sadr's school of thought tries to explore and find a new Islamic economic paradigm
by leaving the conventional economic paradigm. While the mainstream school is considered
to be another face of the neoclassical view by eliminating the element of interest and adding
zakat.
The alternative school led by Prof. Timjur Kura (Chair of the Economics Department at
the University of Southern California), Prof. Jomo and Prof. Muhammad Arief contributes
through critical analysis of economics not only on the views of capitalism and socialism but
also criticizes the development of economic discourse. Islamic economic discourse. They
Islam is a view or ideology that is absolute truth that talks about Islamic economics means
studying human thinking about the verses of God and the sunnah of the Prophet in the
economic aspect. So according to this alternative school of Islamic economics is a
discourse that can still be debated because it is a human interpretation of the Qur'an
and Assunnah that needs to be tested and studied continuously.
Actually there is still one more Islamic economic discourse that is also beginning to
develop in the Islamic world, namely the thought of implementing a gold currency system as
a substitute for paper currency. (which was driven by Dr. Umar Vadillo and the Hisbut Tahrir
activist group) as happened / used during the Abbasid reign, namely the dinar and dirham
(gold and silver) currencies.
However, their thoughts cannot be included in a separate school of thought because they
are relative It is still premature and has not been supported by theoretical foundations and
empirical tests in the context of modern life. Moreover, in economic practice in the field it is
over valued so that instead a currency made of copper called "fulus" was created. Ibn
Taymiyah said: "There is no problem with money not coming from gold and silver as long as
the government is able to maintain its value". Al-Maghribi stated: "If the government prints
money continuously, it means that the government does not maintain the value of the
currency". In another section Ibn Qayyim warned: "If the government continuously prints
money, it can cause usury khafi (hidden usury) in the community, namely usury framed by
buying and selling transactions". This is in accordance with the meaning of the Hadith of the
Prophet, namely "There will come a time when people legalize usury by means of buying
and selling".
Muhammad Nejatullah Siddiqi in his book "Reading in Islamic Economic Thought"
explains the history of Islamic economic thought in four phases, namely:
Phase I: 113 H-451 H/731 M- 1058 M.
Phase II: 450 H-850 H / 1058 M-1446 M.
Phase III: 850 H-1350 H / 1446 M-1932 M.
Phase IV: 1932 AD-present.
In the first phase, it is known that there were 15 Muslim economists who actually
contributed to the development of economic thought, while at the same time there were no
economists from mainland Europe. Known at that time figures such as Abu Yusuf,
Muhammad bin Hasan al-Ahaibani, Harist bin Asan al-Muhadibi, Zaid bin Ali Zainal Abidin
bin Hussein bin Ali bin Abi Talib, Junaid Baghdadi, Ibn Miskawaih, Mawardi, etc.
The discourse that developed at that time was macroeconomic thinking concerning
fiscal policy and state finances as reported in Abu Yusuf's book of Al- Kharaj, which is a
book that is written by Abu Yusuf explains the mechanism for imposing taxes on land. Then
also Abu Ubaid in the book Al-Amwal describes how the management of state finances and
the state budget. In the book Al-Ahkam Al-Sulthaniyah by Mawardi discusses more about the
problem of government administration. And by other Islamic economic thinkers have also
been touched on the operation of unfair market mechanisms.
In the second phase of the development of Islamic economic thought, the discourse on
economics intensively began to develop even though on the other hand it was characterized
by changes in the structure of Islamic power which was getting wider. Several major figures
came to the fore such as Imam Al-Ghozali, Ibn Taymiyah, Ibn Khaldun, Ibn Qayyim. In this
second phase, the scientific discourse was directed more towards microeconomic analysis and
the function of money.
Imam Al-Ghozali addressed the issue of money and its functions. According to Imam
Al-Ghazali, it is not a problem to apply a non-gold and silver currency as long as the
government is able to maintain the stability of the currency as a legal tender. In one of his
writings he said "Money is like a mirror, colorless but can reflect all colors" and he also said
"If money has been traded, then it is the same as imprisoning the function of money", so that if
that happens it will cause depreciation of the currency exchange rate against other currencies.
He also explained about the prohibition of usury fadhl and its impact on the economy. Al-
Ghozali's intensive economic studies also touched on the issue of scales, price control (market
intervention), determination of taxes in an emergency, etc. In some parts of his thought also
touches on how the market mechanism works through the power of demand and supply.
(supply) in determining the market equilibrium.
An example of how to overcome the impact of price increases in order to stabilize
market prices is reflected in the government of Umar bin Khatab when there was inflation
caused by crop failure in the Hijaz area as the center of wheat production. The policy applied
by the government at that time to overcome it was through the market mechanism by
increasing the supply of wheat imported from Fuztadz Egypt so that prices returned to normal.
Conversely, if inflation is caused by market distortions such as monopolistic practices
and market hoarding, then the solution applied is not not by using the market mechanism but
through government intervention. Ibn Taymiyah has long suggested that the government
needs to conduct price intervention at the original equilibrium price to break the behavior of
monopolists and hoarding of goods. In contrast to government intervention, the views of
conventional economists suggest that Price fixing is done at the ceiling price or at the floor
price. Then what about the Prophet's hadith regarding the issue of price increases in Medina at
that time, namely "Allah is the one who determines prices. It is Allah who determines
provision and it is Allah who withholds provision". Apparently it was this hadith that later
inspired some economists to conceptualize the operation of the market mechanism by the
invisible hand. If so, is the proposition put forward by Ibn Taymiyyah regarding price
intervention contrary to the intent of the Prophet's hadith above? The answer is no! because
the direction and purpose of government intervention is so that the equilibrium price in the
market returns to the initial equilibrium position (equilibrium).
The third phase was a period of the rise of European civilization. At that time, 22
economists emerged while at the same time there were only a few Muslim scholars, namely
the Shah of Islam waliAllah with his work Hujjah Allah Al-Balighah which explains how the
provisions of sharia in relation to the behavior of an individual and the arrangement of social
organizations, other scholars are Muhammad Iqbal and Jamaluddin Al- Afghani.
We are familiar with the famous European economists such as JS Mill, Alfred Marshal
who formed the classical capitalist school. Behind them came the names of Karl Marx, Lenin
who gave birth to the socialist school. Then came JM Keynes with his Neo Classical school.
In this phase, economic thought from the West really dominated the world until now.
Meanwhile, Muslim scholars continue to experience moral and intellectual decline so that
most Islamic countries become colonies of western countries.
The fourth phase was characterized by the emergence of a new consciousness among
Muslims. A moral and intellectual awakening among Muslims gave birth to several names
such as Sayyid Qutb, Al- Maududi and Yusuf Qardhawi. However, his thoughts are more
inclined to the approach of fiqh, including the work of scientist Abu al- A'la al-Maududi from
Pakistan. It was not until a decade later that scientific works on Islamic economics began to
appear, especially after the first world conference of Muslims in Mecca in 1976 with the main
theme of Islamic economics (Qardhawi, 1997: 20-21).
Like a sleeping person, the study of Islamic economics as a science at the end of the
1970s was like stumbling awake, and this awakening seems to be related to the trends that
occurred in the world due to the economic crisis of 1974, with the birth of what is called the
flow or monetarist thinking, which further consensus Keynesian began to be abandoned
because it was considered no longer able to overcome the problems of contemporary
economics, this tendency is getting stronger after the collapse of Russia's socialist-communist
economy.
From 1980 until now, the awareness of Muslim thought developed quite rapidly, marked
by the emergence of three schools of Muslim thought, namely the Baqir As-Sadr school
(iqtishoduna), the mainstream school and the alternative school. In this phase, several
prominent names emerged such as MA. Mannan, Annas Zarka, Khurshid Ahmad, Nejatullah
Siddiqi, Hasanus Zaman, etc.
From research conducted by Umer Chapra, for example, it can be seen that the capitalist
economic system that relies on market mechanisms has failed to realize its goals, both
positive goals and normative goals.3 Similar failures achieving 'efficient and fair' economic
activity in the process of allocation and distribution of limited resources. While normative
goals are universal goals based on certain norms from all socio-economic aspects such as fair
income distribution, optimal growth rates etc. that are structured based on religious norms
also experienced by the socialist economic system. Actually, the purpose of the socialist
economic system is to correct various problems found in the capitalist economic system, so
that one of the goals of this socialist economic system is the creation of shared prosperity,
where with the implementation of the system there will no longer be various social classes in
society, economic equality occurs, and society will be free from all kinds of tyranny. This
goal turned out to be a failure, because the designers of the system did not understand what
human beings really meant. In this system, people were treated as cogs in a machine called
the state rather than a system built on the spontaneous and voluntary interactions of individual
economic actors.
Therefore, the development of Islamic economics as an alternative system is very
necessary, and with this alternative economic system the goal of economic activity to achieve
maqosidus shar'iah, which is an effort to improve the quality of economic activity to improve
the welfare of all human beings can be realized. The religious moral element is thus part of
the Islamic economic theory itself, and the Islamic economic mechanism to achieve prosperity
efficiently is built through the values of justice, equity and the development of the fiscal
sector in encouraging economic dynamics.
Conclusion
The above quote shows that Islamic economic thought in classical times was very
advanced and developed before Western scientists discussed it in the 18th-19th centuries. This
fact must be considered by contemporary economists, not only Muslim economists but also
non-Muslim economists around the world. Contribution of Islamic Economics to Modern
Economics In the past three decades, the study and research of Islamic economics has
flourished again. Various international forums on Islamic economics have been held
frequently and widely in various countries, such as conferences seminars, symposiums and
workshops. Dozens of doctors and professors of Islamic economics who are experts in both
conventional and shari'ah economics, appear as speakers in these forums. From their study,
they found that Islamic economic theory is actually not a new science or a science that is
fundamentally derived from modern economic theory that is developing today. Historical
facts show that classical Islamic scientists are the inventors and founders of all scientific
fields, including economics.
Circumstances in each period
There were several circumstances that resulted in the period of khulafa' al- rashidun not
many economists were born, including (1) Al Quran and al Hadith become the main source in
running people's lives. (2) The dominance of policy is more influenced by the attitude of the
leader as a representation of the successor to the Prophet Muhammad. This makes the caliph's
decision a reference in carrying out activities in the social field. (3) The scientific capacity of
each caliph is not the same, the period of leadership of the caliph is relatively different and the
end of his power 3 caliphs ended in political tragedy;. Abu Bakar's caliphate lasted for 2
years, 3 months, 11 days. Umar bin Khattab held the caliphate for 10 years, 6 months, 5 days.
Usman bin Affan ruled for 12 years less 12 days, and Ali bin Abi Talib ruled for 5 years and 3
months (Ahmad, 2000:12). (4) There has not been much friction thought with the Byzantine
(Greek) and Sasanian (Persian) scientific mainstream, because the mastery of Greece and
Persia has not yet reached the process of assimilating scientific potential (see Hodgson, 1999:
287).
While there were not many Muslim thinkers in the field of economics during the
Ummayah dynasty due to, among others; (1) The leader's busyness in expanding new
territories which was quite labor and time consuming. (2) The government system tended to
be Arab-centric, the Arab style was very dominant in the bureaucratic system during the
Ummayah dynasty. Non-Arabs - consisting of Persian descendants - commonly called mawali
were treated as second-class citizens. This situation affected the dialectic between the
bureaucracy and the Persians, in fact, as the more educated people were not so good. (3)
Geographically, Damascus, the capital of the Ummayah dynasty consisted mostly of Arabs, so
it was far from the interaction of the outside world, in contrast to Bagdad, the capital of the
Abbasid dynasty, which was close to Cteshipon, the former capital of the Sassanid empire,
Persia. (see Saefudin, 2002: 30-31)
While progress Islamic thought at period dynasty Abbasid dynasty was caused by; (1)
The contact between Islam and Persia became the development of science and philosophy
because Persia culturally played a major role in the development of the Greek scientific
tradition. (2) There was a great deal of activity in translating Greek literature into Arabic.
According to Mehdi Nakosteen, the translation movement was influenced by the previous
translation movement carried out during the Sassanid Empire, which was centered at the
Jundishapur Academy. This academy was the center for translating Greek and Hindu works of
science and philosophy into Pahlavi. From this school also came some important translations
from Sanskrit, Pahlavi and Syriac into Arabic. (Nakosteen, 1964:33) (3) The relative absence
of territorial clearances and rebellions ensured the stability of the government so that the
government's concentration on promoting intellectual aspects found opportunities. (4) The
existence of heterogeneous civilizations and cultures in Baghdad led to a process of
interaction between one culture and another; Arab, Greek, Persian, and Hindu which had an
impact on intellectual development. Bagdad was also inhabited by the rest of the population
native Chaldaeans and Suryani. (5) Bagdad was considered strategic and profitable because it
was passed by the Tigris and Euphrates rivers. (Saefuddin, 2002: 149) Goods can go in and
out through the river using boats so that Bagdad becomes a bustling economic satellite with
commodities being traded.
Then, the science of economics during the Ummayah or Abbasid era is certainly not as
familiar today. From the above historical developments we can note that (1) Economics is an
integral part of the political, social and cultural life of Islamic society so that economic
thought in the work of Muslim thinkers is difficult to separate from political and cultural
thought. This can be proven by the number of books written by Muslim thinkers who unite
economic problems with social, political and cultural problems. (2) Muslim thinkers are
known as Muslim economists because they have documented works through written works
that can be accessed by generations after him, and or known because there are students of the
Muslim thinker who documented his economic his economic thought. (3) Every Muslim
thinker expresses economic or social, political and cultural issues influenced by the
background of each Muslim thinker's life; residence, country, occupation and others.
The development of Muslim economic thought in Europe
The development of knowledge in the Islamic world influenced the progress of thought
in the European world. The influence to Europe is through several ways as follows:
Travels.
During the 11th and early centuries 12 Several Latin-Scholastic European scholars traveled in
several Arab countries to learn Arabic in order to gain knowledge to bring back to Europe.
During this period many students from Italy, Spain and Southern France attended Muslim
studies to learn mathematics, philosophy, medicine, cosmography, and mathematics other
studies in order to be able to teach in Western universities-which were established after the
studies in the Muslim world (Sharif, 1966:1367).
Translation.
From the 11th to the 14th century, there was a great deal of translation from Arabic to
Latin, not only of Arabic writing, but from Arabic to Hebrew. This was done in Spain, Italy
and France. Some notable translators are known from medieval history such as Adelard of
Bath, Constantine the African, Michael the Sct, Herman the German, Dominic Gundisilavi,
John of Seville, Plato of Trivoli, William of Luna, Gerard of Cremona, and Aflred of Sareshel
(Durant, 1950:910) According to Crombie during the Middle Ages, the translation of Arabic
into Latin was a major undertaking 14th and 15th centuries, Scholastic Europe was also not
directly influenced by the legacy of European thinkers, they still used the knowledge of
Muslim thinkers (see Crombie, 1963: 30).
Oral Tradition
Other important influential sources in the oral tradition are insufficiently available.
According to Chejne that specifically for Oral tradition is an important factor, and this is
evidenced by the literary relationship between the Arabs and the West. According to Chejne,
oral transmission took place over a long period of time and relations were maintained between
Muslims and Christians by being bilingual in Spanish. (see Chejne, 1980:111)
Trade
Some authors point out that trade brought the Arab world through Russian roads to
Polania, the Baltic, Scadinavia, central-western Europe and Iceland. Through trade resulting
in the spread of economic institutions, Arab money was used in the Christian Kingdom of the
North, where there had been no coins for 400 years. (see Hitti, 1943:144)
Diffusion and Institutions
Udovich reports that by the 15th century, there were already various contracts of trust
and partnership between Venetians and Arab merchants in Alexandria. These contractual
forms originated in the Islamic world and eventually spread in Latin Europe through contact
with Muslim scholars and scholars legal experts. Then, the emergence of various forms of
instruments and institutions facilitating the development of commerce and trade in Europe,
such as bills of exchange (siftajah), letters of credit (hawala), specialized trading centers
(funduq) and private banks (ma'una) (see Kramers, 1934:102).
Crusades
The crusades that took place from 1092 to 1292 were a long time for Europe to use to
gain knowledge from the Islamic world. According to Ferruollo, during this period the
Muslim community helped shape European attitudes, feelings and values (see Ferruollo,
1984: 42).
Why Europeans do not recognize that Islamic science is big enough to influence the
development of science in Europe, because (1) Europe in medieval times was known to be
very hostile to the Islamic world. This made it difficult for Europeans to accept the
advantages that had been obtained by the Muslim community (Ghanzanfar, 2002:153); and
(2) Scholars at that time borrowing without telling was a common practice, besides property
rights in the 12th century were not yet recognized. In this regard, the Spanish-era priest of the
Domician order, Raymund Martin - who influenced St. Thomas Aquinas - is known to have
sourced his book Pugio Fidei from al Ghazali's Tahafut al-Falasifa, Maqasid ul-Falasifa, al-
Munqid, Mishkat ul-Anwar, and Ihya Ulumuddin, without citing the references (see Sharif,
1966: 1361)).
If traced further, let alone listen back to how the development of Muslim thought about
Islamic economics that already exists (the author described above) which can be traced since
the life of the Prophet Muhammad SAW. Adam Smith was named the father of modern
economics along with the launch of economic thought in a book entitled 'An Inquiry into the
nature causes the wealth of nations'. From Smith's thought, a tradition of scientific thought
was born Classical economics emphasizes the freedom of market mechanisms in measuring
economic activity (laises faire) without being disturbed by government policies.
Adam Smith gave an example of an economically backward society is the Indians in
North America. While an example of an advanced economic society is the Arabs. The Arabs
Adam Smith meant were certainly a nation of traders in the days of the Prophet. Because in
the next explanation he said that the nation led by Muhammad and the generations after him.
From Adam Smith's explanation, it is clear that he recognized the superiority and
greatness of the Muslim economy in the past. Therefore, it is likely that he has indirectly
adopted Islamic economic theories. The indication shows that the progress of the Islamic
economy in medieval times was felt in England, Adam Smith's homeland, even long before he
was born. In 774 AD, King Offa in England at that time minted gold coins which were a
direct copy of the Islamic dinar, including its Arabic writing. All The writing on the coin is
Arabic, except on one side it says OFFAREX.
This reality shows that the Islamic dinar was then the strongest currency in the world. In
addition, the Muslim economy was far more advanced than Europe. It showed that Muslim
international trade had reached as far as Northern Europe. In 1764, Adam Smith gave up his
professorship in Glasgow England and chose his new career as economic advisor to the Duke
of Buccleuch. It was during this period that Smith traveled extensively abroad, especially to
France. Here he met many famous philosophers. Smith began writing The Wealth of Nations
while he was in France and completed it in 1766, in Kirdcaldy. And ten years later it was
published, namely in 1776. At that time in Europe there were already translated books by
Muslim economists. In fact, in the South of France, many professors were applying the
teaching patterns they had learned from Muslim countries. The explanation above shows that
the role of Muslim scientists is very significant to the rise of European intellectualism,
including in economic thought.
In the next development of classical economic thought was not always able to solve all
the economic problems that are growing increasingly complex, one proof is the emergence of
a severe depression of the world economy ahead of World War II (malaise period). From here
then inspired the birth of economic thought that emphasizes the need for the role of
government in regulating economic activity. This thinking was pioneered by John Maynard
Keynes who is considered a modern economic figure who developed the idea of short-term
economic analysis to encourage economic growth and overcome the problems of
unemployment and inflation.
Contemporary Islamic economic thought can be categorized into three groups of schools
of thought, namely:
Baqir As-Sadr's School
Mainstream Mazhab
Alternative Mazhab
Baqir As-Sadr's School
Scholars who became pioneers of this school are Baqir as- Sadr and Ali Shariati and
scholars from Iran and Iraq. According to As-Sadr's thinking that in studying economics must
be seen from two aspects, namely aspects of philosophy of economics or normative economics
and aspects of positive economics. An example of positive economics, i.e. studying the theory
of consumption and demand which is a common and acceptable phenomenon by anyone
without being influenced by idiology. Meanwhile, from the aspect of phylosophy of
economics which is the result of human thought, it will be found that each human group has
an idiology, a perspective that is not the same. An example is the discussion of 'justice'.
According to the concept of classical capitalism, what is meant by fairness is that you get
what you deserve, meaning 'you get what you have worked for'. Meanwhile, according to
classical socialism, the meaning of 'fair' is that no one has previlege to get more than others,
meaning that no one gets facilities to get more than others, in other words, everyone gets the
same. But Islam has its own meaning in interpreting 'fair' which is laa tadhlimuuna wa laa
tudhlamuuna meaning not to harm each other. So according to Baqir As-sadr's school of
thought, there is a difference in principle between economics and Islamic ideology, Therefore,
there will never be a common ground between Islam and economics.
Economics states that economic problems arise because of the problem of scarcity of
economic resources (scarcity) compared to human needs which are unlimited. In this case, the
school of Baqir As-Sadr rejects the understanding of economic science because in Islam it has
been confirmed that Allah Swt. has created creatures in this world including humans in the
sufficiency of economic resources as stated in His word:1
َ
َقَلَخَ
وََ
لُكَََ
فٍَءْيَش-َ
ُهَر دَقَََت-َْ
يِدْق-اًر
"...........................................................
.......... And He has created all things, and He has measured them out with precision."
Furthermore, according to the school of Baqir As-Sadr, the main problem faced by all
human beings in this world is the problem of unequal distribution of wealth. How the gift
given by Allah SWT to all creatures including humans can be distributed evenly and
proportionally. According to the school of Baqir As-Sadr to realize this, there are several
steps taken, namely:
replacing the term economics with the term iqtishad which implies that it is harmonious,
equal, and balanced (in between).
compile and reconstruct a separate economic science derived from the Qur'an and
Assunnah.
This is the contribution of Baqir As-sadr's school which is quite significant in the
discourse of the development of Islamic economics.
Mainstream Mazhab
Islamic economic thought from the mainstream school of thought is what gives the most
color in the discourse of Islamic economics now because most of its figures from the Islamic
Development Bank (IDB) which has funding facilities and cooperation networks with various
international institutions. The figures of the mainstream school include M. Umer Chapra, M.
A. Mannan, Nejatullah Siddiqi, Khurshid Ahmad, Monzer Kahf etc. equilibrium. But
relatively at a certain time and in a certain place there will still be a problem of scarcity. So
until here there is no difference between conventional economics and Islamic economics. The
difference is only in the mechanism of solving economic problems that according to the
mainstream school must refer to the Qur'an and Assunnah. While in the view of classical
capitalism the solution through the operation of the market mechanism, and classical
socialism through a centralized planning system.
Alternative Mazhab
In contrast to the views of the two previous schools, the alternative school sees that
Baqir as-Sadr's school of thought tries to explore and find a new Islamic economic paradigm
by leaving the conventional economic paradigm. While the mainstream school is considered
to be another face of the neoclassical view by eliminating the element of interest and adding
zakat.
The alternative school led by Prof. Timjur Kura (Chair of the Economics Department at
the University of Southern California), Prof. Jomo and Prof. Muhammad Arief contributes
through critical analysis of economics not only on the views of capitalism and socialism but
also criticizes the development of economic discourse. Islamic economic discourse. They
Islam is a view or ideology that is absolute truth that talks about Islamic economics means
studying human thinking about the verses of God and the sunnah of the Prophet in the
economic aspect. So according to this alternative school of Islamic economics is a
discourse that can still be debated because it is a human interpretation of the Qur'an
and Assunnah that needs to be tested and studied continuously.
Actually there is still one more Islamic economic discourse that is also beginning to
develop in the Islamic world, namely the thought of implementing a gold currency system as
a substitute for paper currency. (which was driven by Dr. Umar Vadillo and the Hisbut Tahrir
activist group) as happened / used during the Abbasid reign, namely the dinar and dirham
(gold and silver) currencies.
However, their thoughts cannot be included in a separate school of thought because they
are relative It is still premature and has not been supported by theoretical foundations and
empirical tests in the context of modern life. Moreover, in economic practice in the field it is
over valued so that instead a currency made of copper called "fulus" was created. Ibn
Taymiyah said: "There is no problem with money not coming from gold and silver as long as
the government is able to maintain its value". Al-Maghribi stated: "If the government prints
money continuously, it means that the government does not maintain the value of the
currency". In another section Ibn Qayyim warned: "If the government continuously prints
money, it can cause usury khafi (hidden usury) in the community, namely usury framed by
buying and selling transactions". This is in accordance with the meaning of the Hadith of the
Prophet, namely "There will come a time when people legalize usury by means of buying
and selling".
Muhammad Nejatullah Siddiqi in his book "Reading in Islamic Economic Thought"
explains the history of Islamic economic thought in four phases, namely:
Phase I: 113 H-451 H/731 M- 1058 M.
Phase II: 450 H-850 H / 1058 M-1446 M.
Phase III: 850 H-1350 H / 1446 M-1932 M.
Phase IV: 1932 AD-present.
In the first phase, it is known that there were 15 Muslim economists who actually
contributed to the development of economic thought, while at the same time there were no
economists from mainland Europe. Known at that time figures such as Abu Yusuf,
Muhammad bin Hasan al-Ahaibani, Harist bin Asan al-Muhadibi, Zaid bin Ali Zainal Abidin
bin Hussein bin Ali bin Abi Talib, Junaid Baghdadi, Ibn Miskawaih, Mawardi, etc.
The discourse that developed at that time was macroeconomic thinking concerning
fiscal policy and state finances as reported in Abu Yusuf's book of Al- Kharaj, which is a
book that is written by Abu Yusuf explains the mechanism for imposing taxes on land. Then
also Abu Ubaid in the book Al-Amwal describes how the management of state finances and
the state budget. In the book Al-Ahkam Al-Sulthaniyah by Mawardi discusses more about the
problem of government administration. And by other Islamic economic thinkers have also
been touched on the operation of unfair market mechanisms.
In the second phase of the development of Islamic economic thought, the discourse on
economics intensively began to develop even though on the other hand it was characterized
by changes in the structure of Islamic power which was getting wider. Several major figures
came to the fore such as Imam Al-Ghozali, Ibn Taymiyah, Ibn Khaldun, Ibn Qayyim. In this
second phase, the scientific discourse was directed more towards microeconomic analysis and
the function of money.
Imam Al-Ghozali addressed the issue of money and its functions. According to Imam
Al-Ghazali, it is not a problem to apply a non-gold and silver currency as long as the
government is able to maintain the stability of the currency as a legal tender. In one of his
writings he said "Money is like a mirror, colorless but can reflect all colors" and he also said
"If money has been traded, then it is the same as imprisoning the function of money", so that if
that happens it will cause depreciation of the currency exchange rate against other currencies.
He also explained about the prohibition of usury fadhl and its impact on the economy. Al-
Ghozali's intensive economic studies also touched on the issue of scales, price control (market
intervention), determination of taxes in an emergency, etc. In some parts of his thought also
touches on how the market mechanism works through the power of demand and supply.
(supply) in determining the market equilibrium.
An example of how to overcome the impact of price increases in order to stabilize
market prices is reflected in the government of Umar bin Khatab when there was inflation
caused by crop failure in the Hijaz area as the center of wheat production. The policy applied
by the government at that time to overcome it was through the market mechanism by
increasing the supply of wheat imported from Fuztadz Egypt so that prices returned to normal.
Conversely, if inflation is caused by market distortions such as monopolistic practices
and market hoarding, then the solution applied is not not by using the market mechanism but
through government intervention. Ibn Taymiyah has long suggested that the government
needs to conduct price intervention at the original equilibrium price to break the behavior of
monopolists and hoarding of goods. In contrast to government intervention, the views of
conventional economists suggest that Price fixing is done at the ceiling price or at the floor
price. Then what about the Prophet's hadith regarding the issue of price increases in Medina at
that time, namely "Allah is the one who determines prices. It is Allah who determines
provision and it is Allah who withholds provision". Apparently it was this hadith that later
inspired some economists to conceptualize the operation of the market mechanism by the
invisible hand. If so, is the proposition put forward by Ibn Taymiyyah regarding price
intervention contrary to the intent of the Prophet's hadith above? The answer is no! because
the direction and purpose of government intervention is so that the equilibrium price in the
market returns to the initial equilibrium position (equilibrium).
The third phase was a period of the rise of European civilization. At that time, 22
economists emerged while at the same time there were only a few Muslim scholars, namely
the Shah of Islam waliAllah with his work Hujjah Allah Al-Balighah which explains how the
provisions of sharia in relation to the behavior of an individual and the arrangement of social
organizations, other scholars are Muhammad Iqbal and Jamaluddin Al- Afghani.
We are familiar with the famous European economists such as JS Mill, Alfred Marshal
who formed the classical capitalist school. Behind them came the names of Karl Marx, Lenin
who gave birth to the socialist school. Then came JM Keynes with his Neo Classical school.
In this phase, economic thought from the West really dominated the world until now.
Meanwhile, Muslim scholars continue to experience moral and intellectual decline so that
most Islamic countries become colonies of western countries.
The fourth phase was characterized by the emergence of a new consciousness among
Muslims. A moral and intellectual awakening among Muslims gave birth to several names
such as Sayyid Qutb, Al- Maududi and Yusuf Qardhawi. However, his thoughts are more
inclined to the approach of fiqh, including the work of scientist Abu al- A'la al-Maududi from
Pakistan. It was not until a decade later that scientific works on Islamic economics began to
appear, especially after the first world conference of Muslims in Mecca in 1976 with the main
theme of Islamic economics (Qardhawi, 1997: 20-21).
Like a sleeping person, the study of Islamic economics as a science at the end of the
1970s was like stumbling awake, and this awakening seems to be related to the trends that
occurred in the world due to the economic crisis of 1974, with the birth of what is called the
flow or monetarist thinking, which further consensus Keynesian began to be abandoned
because it was considered no longer able to overcome the problems of contemporary
economics, this tendency is getting stronger after the collapse of Russia's socialist-communist
economy.
From 1980 until now, the awareness of Muslim thought developed quite rapidly, marked
by the emergence of three schools of Muslim thought, namely the Baqir As-Sadr school
(iqtishoduna), the mainstream school and the alternative school. In this phase, several
prominent names emerged such as MA. Mannan, Annas Zarka, Khurshid Ahmad, Nejatullah
Siddiqi, Hasanus Zaman, etc.
From research conducted by Umer Chapra, for example, it can be seen that the capitalist
economic system that relies on market mechanisms has failed to realize its goals, both
positive goals and normative goals.3 Similar failures achieving 'efficient and fair' economic
activity in the process of allocation and distribution of limited resources. While normative
goals are universal goals based on certain norms from all socio-economic aspects such as fair
income distribution, optimal growth rates etc. that are structured based on religious norms
also experienced by the socialist economic system. Actually, the purpose of the socialist
economic system is to correct various problems found in the capitalist economic system, so
that one of the goals of this socialist economic system is the creation of shared prosperity,
where with the implementation of the system there will no longer be various social classes in
society, economic equality occurs, and society will be free from all kinds of tyranny. This
goal turned out to be a failure, because the designers of the system did not understand what
human beings really meant. In this system, people were treated as cogs in a machine called
the state rather than a system built on the spontaneous and voluntary interactions of individual
economic actors.
Therefore, the development of Islamic economics as an alternative system is very
necessary, and with this alternative economic system the goal of economic activity to achieve
maqosidus shar'iah, which is an effort to improve the quality of economic activity to improve
the welfare of all human beings can be realized. The religious moral element is thus part of
the Islamic economic theory itself, and the Islamic economic mechanism to achieve prosperity
efficiently is built through the values of justice, equity and the development of the fiscal
sector in encouraging economic dynamics.
Conclusion
The above quote shows that Islamic economic thought in classical times was very
advanced and developed before Western scientists discussed it in the 18th-19th centuries. This
fact must be considered by contemporary economists, not only Muslim economists but also
non-Muslim economists around the world. Contribution of Islamic Economics to Modern
Economics In the past three decades, the study and research of Islamic economics has
flourished again. Various international forums on Islamic economics have been held
frequently and widely in various countries, such as conferences seminars, symposiums and
workshops. Dozens of doctors and professors of Islamic economics who are experts in both
conventional and shari'ah economics, appear as speakers in these forums. From their study,
they found that Islamic economic theory is actually not a new science or a science that is
fundamentally derived from modern economic theory that is developing today. Historical
facts show that classical Islamic scientists are the inventors and founders of all scientific
fields, including economics.
Circumstances in each period
There were several circumstances that resulted in the period of khulafa' al- rashidun not
many economists were born, including (1) Al Quran and al Hadith become the main source in
running people's lives. (2) The dominance of policy is more influenced by the attitude of the
leader as a representation of the successor to the Prophet Muhammad. This makes the caliph's
decision a reference in carrying out activities in the social field. (3) The scientific capacity of
each caliph is not the same, the period of leadership of the caliph is relatively different and the
end of his power 3 caliphs ended in political tragedy;. Abu Bakar's caliphate lasted for 2
years, 3 months, 11 days. Umar bin Khattab held the caliphate for 10 years, 6 months, 5 days.
Usman bin Affan ruled for 12 years less 12 days, and Ali bin Abi Talib ruled for 5 years and 3
months (Ahmad, 2000:12). (4) There has not been much friction thought with the Byzantine
(Greek) and Sasanian (Persian) scientific mainstream, because the mastery of Greece and
Persia has not yet reached the process of assimilating scientific potential (see Hodgson, 1999:
287).
While there were not many Muslim thinkers in the field of economics during the
Ummayah dynasty due to, among others; (1) The leader's busyness in expanding new
territories which was quite labor and time consuming. (2) The government system tended to
be Arab-centric, the Arab style was very dominant in the bureaucratic system during the
Ummayah dynasty. Non-Arabs - consisting of Persian descendants - commonly called mawali
were treated as second-class citizens. This situation affected the dialectic between the
bureaucracy and the Persians, in fact, as the more educated people were not so good. (3)
Geographically, Damascus, the capital of the Ummayah dynasty consisted mostly of Arabs, so
it was far from the interaction of the outside world, in contrast to Bagdad, the capital of the
Abbasid dynasty, which was close to Cteshipon, the former capital of the Sassanid empire,
Persia. (see Saefudin, 2002: 30-31)
While progress Islamic thought at period dynasty Abbasid dynasty was caused by; (1)
The contact between Islam and Persia became the development of science and philosophy
because Persia culturally played a major role in the development of the Greek scientific
tradition. (2) There was a great deal of activity in translating Greek literature into Arabic.
According to Mehdi Nakosteen, the translation movement was influenced by the previous
translation movement carried out during the Sassanid Empire, which was centered at the
Jundishapur Academy. This academy was the center for translating Greek and Hindu works of
science and philosophy into Pahlavi. From this school also came some important translations
from Sanskrit, Pahlavi and Syriac into Arabic. (Nakosteen, 1964:33) (3) The relative absence
of territorial clearances and rebellions ensured the stability of the government so that the
government's concentration on promoting intellectual aspects found opportunities. (4) The
existence of heterogeneous civilizations and cultures in Baghdad led to a process of
interaction between one culture and another; Arab, Greek, Persian, and Hindu which had an
impact on intellectual development. Bagdad was also inhabited by the rest of the population
native Chaldaeans and Suryani. (5) Bagdad was considered strategic and profitable because it
was passed by the Tigris and Euphrates rivers. (Saefuddin, 2002: 149) Goods can go in and
out through the river using boats so that Bagdad becomes a bustling economic satellite with
commodities being traded.
Then, the science of economics during the Ummayah or Abbasid era is certainly not as
familiar today. From the above historical developments we can note that (1) Economics is an
integral part of the political, social and cultural life of Islamic society so that economic
thought in the work of Muslim thinkers is difficult to separate from political and cultural
thought. This can be proven by the number of books written by Muslim thinkers who unite
economic problems with social, political and cultural problems. (2) Muslim thinkers are
known as Muslim economists because they have documented works through written works
that can be accessed by generations after him, and or known because there are students of the
Muslim thinker who documented his economic his economic thought. (3) Every Muslim
thinker expresses economic or social, political and cultural issues influenced by the
background of each Muslim thinker's life; residence, country, occupation and others.
The development of Muslim economic thought in Europe
The development of knowledge in the Islamic world influenced the progress of thought
in the European world. The influence to Europe is through several ways as follows:
Travels.
During the 11th and early centuries 12 Several Latin-Scholastic European scholars traveled in
several Arab countries to learn Arabic in order to gain knowledge to bring back to Europe.
During this period many students from Italy, Spain and Southern France attended Muslim
studies to learn mathematics, philosophy, medicine, cosmography, and mathematics other
studies in order to be able to teach in Western universities-which were established after the
studies in the Muslim world (Sharif, 1966:1367).
Translation.
From the 11th to the 14th century, there was a great deal of translation from Arabic to
Latin, not only of Arabic writing, but from Arabic to Hebrew. This was done in Spain, Italy
and France. Some notable translators are known from medieval history such as Adelard of
Bath, Constantine the African, Michael the Sct, Herman the German, Dominic Gundisilavi,
John of Seville, Plato of Trivoli, William of Luna, Gerard of Cremona, and Aflred of Sareshel
(Durant, 1950:910) According to Crombie during the Middle Ages, the translation of Arabic
into Latin was a major undertaking 14th and 15th centuries, Scholastic Europe was also not
directly influenced by the legacy of European thinkers, they still used the knowledge of
Muslim thinkers (see Crombie, 1963: 30).
Oral Tradition
Other important influential sources in the oral tradition are insufficiently available.
According to Chejne that specifically for Oral tradition is an important factor, and this is
evidenced by the literary relationship between the Arabs and the West. According to Chejne,
oral transmission took place over a long period of time and relations were maintained between
Muslims and Christians by being bilingual in Spanish. (see Chejne, 1980:111)
Trade
Some authors point out that trade brought the Arab world through Russian roads to
Polania, the Baltic, Scadinavia, central-western Europe and Iceland. Through trade resulting
in the spread of economic institutions, Arab money was used in the Christian Kingdom of the
North, where there had been no coins for 400 years. (see Hitti, 1943:144)
Diffusion and Institutions
Udovich reports that by the 15th century, there were already various contracts of trust
and partnership between Venetians and Arab merchants in Alexandria. These contractual
forms originated in the Islamic world and eventually spread in Latin Europe through contact
with Muslim scholars and scholars legal experts. Then, the emergence of various forms of
instruments and institutions facilitating the development of commerce and trade in Europe,
such as bills of exchange (siftajah), letters of credit (hawala), specialized trading centers
(funduq) and private banks (ma'una) (see Kramers, 1934:102).
Crusades
The crusades that took place from 1092 to 1292 were a long time for Europe to use to
gain knowledge from the Islamic world. According to Ferruollo, during this period the
Muslim community helped shape European attitudes, feelings and values (see Ferruollo,
1984: 42).
Why Europeans do not recognize that Islamic science is big enough to influence the
development of science in Europe, because (1) Europe in medieval times was known to be
very hostile to the Islamic world. This made it difficult for Europeans to accept the
advantages that had been obtained by the Muslim community (Ghanzanfar, 2002:153); and
(2) Scholars at that time borrowing without telling was a common practice, besides property
rights in the 12th century were not yet recognized. In this regard, the Spanish-era priest of the
Domician order, Raymund Martin - who influenced St. Thomas Aquinas - is known to have
sourced his book Pugio Fidei from al Ghazali's Tahafut al-Falasifa, Maqasid ul-Falasifa, al-
Munqid, Mishkat ul-Anwar, and Ihya Ulumuddin, without citing the references (see Sharif,
1966: 1361)).
If traced further, let alone listen back to how the development of Muslim thought about
Islamic economics that already exists (the author described above) which can be traced since
the life of the Prophet Muhammad SAW. Adam Smith was named the father of modern
economics along with the launch of economic thought in a book entitled 'An Inquiry into the
nature causes the wealth of nations'. From Smith's thought, a tradition of scientific thought
was born Classical economics emphasizes the freedom of market mechanisms in measuring
economic activity (laises faire) without being disturbed by government policies.
Adam Smith gave an example of an economically backward society is the Indians in
North America. While an example of an advanced economic society is the Arabs. The Arabs
Adam Smith meant were certainly a nation of traders in the days of the Prophet. Because in
the next explanation he said that the nation led by Muhammad and the generations after him.
From Adam Smith's explanation, it is clear that he recognized the superiority and
greatness of the Muslim economy in the past. Therefore, it is likely that he has indirectly
adopted Islamic economic theories. The indication shows that the progress of the Islamic
economy in medieval times was felt in England, Adam Smith's homeland, even long before he
was born. In 774 AD, King Offa in England at that time minted gold coins which were a
direct copy of the Islamic dinar, including its Arabic writing. All The writing on the coin is
Arabic, except on one side it says OFFAREX.
This reality shows that the Islamic dinar was then the strongest currency in the world. In
addition, the Muslim economy was far more advanced than Europe. It showed that Muslim
international trade had reached as far as Northern Europe. In 1764, Adam Smith gave up his
professorship in Glasgow England and chose his new career as economic advisor to the Duke
of Buccleuch. It was during this period that Smith traveled extensively abroad, especially to
France. Here he met many famous philosophers. Smith began writing The Wealth of Nations
while he was in France and completed it in 1766, in Kirdcaldy. And ten years later it was
published, namely in 1776. At that time in Europe there were already translated books by
Muslim economists. In fact, in the South of France, many professors were applying the
teaching patterns they had learned from Muslim countries. The explanation above shows that
the role of Muslim scientists is very significant to the rise of European intellectualism,
including in economic thought.
In the next development of classical economic thought was not always able to solve all
the economic problems that are growing increasingly complex, one proof is the emergence of
a severe depression of the world economy ahead of World War II (malaise period). From here
then inspired the birth of economic thought that emphasizes the need for the role of
government in regulating economic activity. This thinking was pioneered by John Maynard
Keynes who is considered a modern economic figure who developed the idea of short-term
economic analysis to encourage economic growth and overcome the problems of
unemployment and inflation.
Contemporary Islamic economic thought can be categorized into three groups of schools
of thought, namely:
Baqir As-Sadr's School
Mainstream Mazhab
Alternative Mazhab
Baqir As-Sadr's School
Scholars who became pioneers of this school are Baqir as- Sadr and Ali Shariati and
scholars from Iran and Iraq. According to As-Sadr's thinking that in studying economics must
be seen from two aspects, namely aspects of philosophy of economics or normative economics
and aspects of positive economics. An example of positive economics, i.e. studying the theory
of consumption and demand which is a common and acceptable phenomenon by anyone
without being influenced by idiology. Meanwhile, from the aspect of phylosophy of
economics which is the result of human thought, it will be found that each human group has
an idiology, a perspective that is not the same. An example is the discussion of 'justice'.
According to the concept of classical capitalism, what is meant by fairness is that you get
what you deserve, meaning 'you get what you have worked for'. Meanwhile, according to
classical socialism, the meaning of 'fair' is that no one has previlege to get more than others,
meaning that no one gets facilities to get more than others, in other words, everyone gets the
same. But Islam has its own meaning in interpreting 'fair' which is laa tadhlimuuna wa laa
tudhlamuuna meaning not to harm each other. So according to Baqir As-sadr's school of
thought, there is a difference in principle between economics and Islamic ideology, Therefore,
there will never be a common ground between Islam and economics.
Economics states that economic problems arise because of the problem of scarcity of
economic resources (scarcity) compared to human needs which are unlimited. In this case, the
school of Baqir As-Sadr rejects the understanding of economic science because in Islam it has
been confirmed that Allah Swt. has created creatures in this world including humans in the
sufficiency of economic resources as stated in His word:1
َ
َقَلَخَ
وََ
لُكَََ
فٍَءْيَش-َ
ُهَر دَقَََت-َْ
يِدْق-اًر
"...........................................................
.......... And He has created all things, and He has measured them out with precision."
Furthermore, according to the school of Baqir As-Sadr, the main problem faced by all
human beings in this world is the problem of unequal distribution of wealth. How the gift
given by Allah SWT to all creatures including humans can be distributed evenly and
proportionally. According to the school of Baqir As-Sadr to realize this, there are several
steps taken, namely:
replacing the term economics with the term iqtishad which implies that it is harmonious,
equal, and balanced (in between).
compile and reconstruct a separate economic science derived from the Qur'an and
Assunnah.
This is the contribution of Baqir As-sadr's school which is quite significant in the
discourse of the development of Islamic economics.
Mainstream Mazhab
Islamic economic thought from the mainstream school of thought is what gives the most
color in the discourse of Islamic economics now because most of its figures from the Islamic
Development Bank (IDB) which has funding facilities and cooperation networks with various
international institutions. The figures of the mainstream school include M. Umer Chapra, M.
A. Mannan, Nejatullah Siddiqi, Khurshid Ahmad, Monzer Kahf etc. equilibrium. But
relatively at a certain time and in a certain place there will still be a problem of scarcity. So
until here there is no difference between conventional economics and Islamic economics. The
difference is only in the mechanism of solving economic problems that according to the
mainstream school must refer to the Qur'an and Assunnah. While in the view of classical
capitalism the solution through the operation of the market mechanism, and classical
socialism through a centralized planning system.
Alternative Mazhab
In contrast to the views of the two previous schools, the alternative school sees that
Baqir as-Sadr's school of thought tries to explore and find a new Islamic economic paradigm
by leaving the conventional economic paradigm. While the mainstream school is considered
to be another face of the neoclassical view by eliminating the element of interest and adding
zakat.
The alternative school led by Prof. Timjur Kura (Chair of the Economics Department at
the University of Southern California), Prof. Jomo and Prof. Muhammad Arief contributes
through critical analysis of economics not only on the views of capitalism and socialism but
also criticizes the development of economic discourse. Islamic economic discourse. They
Islam is a view or ideology that is absolute truth that talks about Islamic economics means
studying human thinking about the verses of God and the sunnah of the Prophet in the
economic aspect. So according to this alternative school of Islamic economics is a
discourse that can still be debated because it is a human interpretation of the Qur'an
and Assunnah that needs to be tested and studied continuously.
Actually there is still one more Islamic economic discourse that is also beginning to
develop in the Islamic world, namely the thought of implementing a gold currency system as
a substitute for paper currency. (which was driven by Dr. Umar Vadillo and the Hisbut Tahrir
activist group) as happened / used during the Abbasid reign, namely the dinar and dirham
(gold and silver) currencies.
However, their thoughts cannot be included in a separate school of thought because they
are relative It is still premature and has not been supported by theoretical foundations and
empirical tests in the context of modern life. Moreover, in economic practice in the field it is
over valued so that instead a currency made of copper called "fulus" was created. Ibn
Taymiyah said: "There is no problem with money not coming from gold and silver as long as
the government is able to maintain its value". Al-Maghribi stated: "If the government prints
money continuously, it means that the government does not maintain the value of the
currency". In another section Ibn Qayyim warned: "If the government continuously prints
money, it can cause usury khafi (hidden usury) in the community, namely usury framed by
buying and selling transactions". This is in accordance with the meaning of the Hadith of the
Prophet, namely "There will come a time when people legalize usury by means of buying
and selling".
Muhammad Nejatullah Siddiqi in his book "Reading in Islamic Economic Thought"
explains the history of Islamic economic thought in four phases, namely:
Phase I: 113 H-451 H/731 M- 1058 M.
Phase II: 450 H-850 H / 1058 M-1446 M.
Phase III: 850 H-1350 H / 1446 M-1932 M.
Phase IV: 1932 AD-present.
In the first phase, it is known that there were 15 Muslim economists who actually
contributed to the development of economic thought, while at the same time there were no
economists from mainland Europe. Known at that time figures such as Abu Yusuf,
Muhammad bin Hasan al-Ahaibani, Harist bin Asan al-Muhadibi, Zaid bin Ali Zainal Abidin
bin Hussein bin Ali bin Abi Talib, Junaid Baghdadi, Ibn Miskawaih, Mawardi, etc.
The discourse that developed at that time was macroeconomic thinking concerning
fiscal policy and state finances as reported in Abu Yusuf's book of Al- Kharaj, which is a
book that is written by Abu Yusuf explains the mechanism for imposing taxes on land. Then
also Abu Ubaid in the book Al-Amwal describes how the management of state finances and
the state budget. In the book Al-Ahkam Al-Sulthaniyah by Mawardi discusses more about the
problem of government administration. And by other Islamic economic thinkers have also
been touched on the operation of unfair market mechanisms.
In the second phase of the development of Islamic economic thought, the discourse on
economics intensively began to develop even though on the other hand it was characterized
by changes in the structure of Islamic power which was getting wider. Several major figures
came to the fore such as Imam Al-Ghozali, Ibn Taymiyah, Ibn Khaldun, Ibn Qayyim. In this
second phase, the scientific discourse was directed more towards microeconomic analysis and
the function of money.
Imam Al-Ghozali addressed the issue of money and its functions. According to Imam
Al-Ghazali, it is not a problem to apply a non-gold and silver currency as long as the
government is able to maintain the stability of the currency as a legal tender. In one of his
writings he said "Money is like a mirror, colorless but can reflect all colors" and he also said
"If money has been traded, then it is the same as imprisoning the function of money", so that if
that happens it will cause depreciation of the currency exchange rate against other currencies.
He also explained about the prohibition of usury fadhl and its impact on the economy. Al-
Ghozali's intensive economic studies also touched on the issue of scales, price control (market
intervention), determination of taxes in an emergency, etc. In some parts of his thought also
touches on how the market mechanism works through the power of demand and supply.
(supply) in determining the market equilibrium.
An example of how to overcome the impact of price increases in order to stabilize
market prices is reflected in the government of Umar bin Khatab when there was inflation
caused by crop failure in the Hijaz area as the center of wheat production. The policy applied
by the government at that time to overcome it was through the market mechanism by
increasing the supply of wheat imported from Fuztadz Egypt so that prices returned to normal.
Conversely, if inflation is caused by market distortions such as monopolistic practices
and market hoarding, then the solution applied is not not by using the market mechanism but
through government intervention. Ibn Taymiyah has long suggested that the government
needs to conduct price intervention at the original equilibrium price to break the behavior of
monopolists and hoarding of goods. In contrast to government intervention, the views of
conventional economists suggest that Price fixing is done at the ceiling price or at the floor
price. Then what about the Prophet's hadith regarding the issue of price increases in Medina at
that time, namely "Allah is the one who determines prices. It is Allah who determines
provision and it is Allah who withholds provision". Apparently it was this hadith that later
inspired some economists to conceptualize the operation of the market mechanism by the
invisible hand. If so, is the proposition put forward by Ibn Taymiyyah regarding price
intervention contrary to the intent of the Prophet's hadith above? The answer is no! because
the direction and purpose of government intervention is so that the equilibrium price in the
market returns to the initial equilibrium position (equilibrium).
The third phase was a period of the rise of European civilization. At that time, 22
economists emerged while at the same time there were only a few Muslim scholars, namely
the Shah of Islam waliAllah with his work Hujjah Allah Al-Balighah which explains how the
provisions of sharia in relation to the behavior of an individual and the arrangement of social
organizations, other scholars are Muhammad Iqbal and Jamaluddin Al- Afghani.
We are familiar with the famous European economists such as JS Mill, Alfred Marshal
who formed the classical capitalist school. Behind them came the names of Karl Marx, Lenin
who gave birth to the socialist school. Then came JM Keynes with his Neo Classical school.
In this phase, economic thought from the West really dominated the world until now.
Meanwhile, Muslim scholars continue to experience moral and intellectual decline so that
most Islamic countries become colonies of western countries.
The fourth phase was characterized by the emergence of a new consciousness among
Muslims. A moral and intellectual awakening among Muslims gave birth to several names
such as Sayyid Qutb, Al- Maududi and Yusuf Qardhawi. However, his thoughts are more
inclined to the approach of fiqh, including the work of scientist Abu al- A'la al-Maududi from
Pakistan. It was not until a decade later that scientific works on Islamic economics began to
appear, especially after the first world conference of Muslims in Mecca in 1976 with the main
theme of Islamic economics (Qardhawi, 1997: 20-21).
Like a sleeping person, the study of Islamic economics as a science at the end of the
1970s was like stumbling awake, and this awakening seems to be related to the trends that
occurred in the world due to the economic crisis of 1974, with the birth of what is called the
flow or monetarist thinking, which further consensus Keynesian began to be abandoned
because it was considered no longer able to overcome the problems of contemporary
economics, this tendency is getting stronger after the collapse of Russia's socialist-communist
economy.
From 1980 until now, the awareness of Muslim thought developed quite rapidly, marked
by the emergence of three schools of Muslim thought, namely the Baqir As-Sadr school
(iqtishoduna), the mainstream school and the alternative school. In this phase, several
prominent names emerged such as MA. Mannan, Annas Zarka, Khurshid Ahmad, Nejatullah
Siddiqi, Hasanus Zaman, etc.
From research conducted by Umer Chapra, for example, it can be seen that the capitalist
economic system that relies on market mechanisms has failed to realize its goals, both
positive goals and normative goals.3 Similar failures achieving 'efficient and fair' economic
activity in the process of allocation and distribution of limited resources. While normative
goals are universal goals based on certain norms from all socio-economic aspects such as fair
income distribution, optimal growth rates etc. that are structured based on religious norms
also experienced by the socialist economic system. Actually, the purpose of the socialist
economic system is to correct various problems found in the capitalist economic system, so
that one of the goals of this socialist economic system is the creation of shared prosperity,
where with the implementation of the system there will no longer be various social classes in
society, economic equality occurs, and society will be free from all kinds of tyranny. This
goal turned out to be a failure, because the designers of the system did not understand what
human beings really meant. In this system, people were treated as cogs in a machine called
the state rather than a system built on the spontaneous and voluntary interactions of individual
economic actors.
Therefore, the development of Islamic economics as an alternative system is very
necessary, and with this alternative economic system the goal of economic activity to achieve
maqosidus shar'iah, which is an effort to improve the quality of economic activity to improve
the welfare of all human beings can be realized. The religious moral element is thus part of
the Islamic economic theory itself, and the Islamic economic mechanism to achieve prosperity
efficiently is built through the values of justice, equity and the development of the fiscal
sector in encouraging economic dynamics.
Conclusion
The above quote shows that Islamic economic thought in classical times was very
advanced and developed before Western scientists discussed it in the 18th-19th centuries. This
fact must be considered by contemporary economists, not only Muslim economists but also
non-Muslim economists around the world. Contribution of Islamic Economics to Modern
Economics In the past three decades, the study and research of Islamic economics has
flourished again. Various international forums on Islamic economics have been held
frequently and widely in various countries, such as conferences seminars, symposiums and
workshops. Dozens of doctors and professors of Islamic economics who are experts in both
conventional and shari'ah economics, appear as speakers in these forums. From their study,
they found that Islamic economic theory is actually not a new science or a science that is
fundamentally derived from modern economic theory that is developing today. Historical
facts show that classical Islamic scientists are the inventors and founders of all scientific
fields, including economics.
Circumstances in each period
There were several circumstances that resulted in the period of khulafa' al- rashidun not
many economists were born, including (1) Al Quran and al Hadith become the main source in
running people's lives. (2) The dominance of policy is more influenced by the attitude of the
leader as a representation of the successor to the Prophet Muhammad. This makes the caliph's
decision a reference in carrying out activities in the social field. (3) The scientific capacity of
each caliph is not the same, the period of leadership of the caliph is relatively different and the
end of his power 3 caliphs ended in political tragedy;. Abu Bakar's caliphate lasted for 2
years, 3 months, 11 days. Umar bin Khattab held the caliphate for 10 years, 6 months, 5 days.
Usman bin Affan ruled for 12 years less 12 days, and Ali bin Abi Talib ruled for 5 years and 3
months (Ahmad, 2000:12). (4) There has not been much friction thought with the Byzantine
(Greek) and Sasanian (Persian) scientific mainstream, because the mastery of Greece and
Persia has not yet reached the process of assimilating scientific potential (see Hodgson, 1999:
287).
While there were not many Muslim thinkers in the field of economics during the
Ummayah dynasty due to, among others; (1) The leader's busyness in expanding new
territories which was quite labor and time consuming. (2) The government system tended to
be Arab-centric, the Arab style was very dominant in the bureaucratic system during the
Ummayah dynasty. Non-Arabs - consisting of Persian descendants - commonly called mawali
were treated as second-class citizens. This situation affected the dialectic between the
bureaucracy and the Persians, in fact, as the more educated people were not so good. (3)
Geographically, Damascus, the capital of the Ummayah dynasty consisted mostly of Arabs, so
it was far from the interaction of the outside world, in contrast to Bagdad, the capital of the
Abbasid dynasty, which was close to Cteshipon, the former capital of the Sassanid empire,
Persia. (see Saefudin, 2002: 30-31)
While progress Islamic thought at period dynasty Abbasid dynasty was caused by; (1)
The contact between Islam and Persia became the development of science and philosophy
because Persia culturally played a major role in the development of the Greek scientific
tradition. (2) There was a great deal of activity in translating Greek literature into Arabic.
According to Mehdi Nakosteen, the translation movement was influenced by the previous
translation movement carried out during the Sassanid Empire, which was centered at the
Jundishapur Academy. This academy was the center for translating Greek and Hindu works of
science and philosophy into Pahlavi. From this school also came some important translations
from Sanskrit, Pahlavi and Syriac into Arabic. (Nakosteen, 1964:33) (3) The relative absence
of territorial clearances and rebellions ensured the stability of the government so that the
government's concentration on promoting intellectual aspects found opportunities. (4) The
existence of heterogeneous civilizations and cultures in Baghdad led to a process of
interaction between one culture and another; Arab, Greek, Persian, and Hindu which had an
impact on intellectual development. Bagdad was also inhabited by the rest of the population
native Chaldaeans and Suryani. (5) Bagdad was considered strategic and profitable because it
was passed by the Tigris and Euphrates rivers. (Saefuddin, 2002: 149) Goods can go in and
out through the river using boats so that Bagdad becomes a bustling economic satellite with
commodities being traded.
Then, the science of economics during the Ummayah or Abbasid era is certainly not as
familiar today. From the above historical developments we can note that (1) Economics is an
integral part of the political, social and cultural life of Islamic society so that economic
thought in the work of Muslim thinkers is difficult to separate from political and cultural
thought. This can be proven by the number of books written by Muslim thinkers who unite
economic problems with social, political and cultural problems. (2) Muslim thinkers are
known as Muslim economists because they have documented works through written works
that can be accessed by generations after him, and or known because there are students of the
Muslim thinker who documented his economic his economic thought. (3) Every Muslim
thinker expresses economic or social, political and cultural issues influenced by the
background of each Muslim thinker's life; residence, country, occupation and others.
The development of Muslim economic thought in Europe
The development of knowledge in the Islamic world influenced the progress of thought
in the European world. The influence to Europe is through several ways as follows:
Travels.
During the 11th and early centuries 12 Several Latin-Scholastic European scholars traveled in
several Arab countries to learn Arabic in order to gain knowledge to bring back to Europe.
During this period many students from Italy, Spain and Southern France attended Muslim
studies to learn mathematics, philosophy, medicine, cosmography, and mathematics other
studies in order to be able to teach in Western universities-which were established after the
studies in the Muslim world (Sharif, 1966:1367).
Translation.
From the 11th to the 14th century, there was a great deal of translation from Arabic to
Latin, not only of Arabic writing, but from Arabic to Hebrew. This was done in Spain, Italy
and France. Some notable translators are known from medieval history such as Adelard of
Bath, Constantine the African, Michael the Sct, Herman the German, Dominic Gundisilavi,
John of Seville, Plato of Trivoli, William of Luna, Gerard of Cremona, and Aflred of Sareshel
(Durant, 1950:910) According to Crombie during the Middle Ages, the translation of Arabic
into Latin was a major undertaking 14th and 15th centuries, Scholastic Europe was also not
directly influenced by the legacy of European thinkers, they still used the knowledge of
Muslim thinkers (see Crombie, 1963: 30).
Oral Tradition
Other important influential sources in the oral tradition are insufficiently available.
According to Chejne that specifically for Oral tradition is an important factor, and this is
evidenced by the literary relationship between the Arabs and the West. According to Chejne,
oral transmission took place over a long period of time and relations were maintained between
Muslims and Christians by being bilingual in Spanish. (see Chejne, 1980:111)
Trade
Some authors point out that trade brought the Arab world through Russian roads to
Polania, the Baltic, Scadinavia, central-western Europe and Iceland. Through trade resulting
in the spread of economic institutions, Arab money was used in the Christian Kingdom of the
North, where there had been no coins for 400 years. (see Hitti, 1943:144)
Diffusion and Institutions
Udovich reports that by the 15th century, there were already various contracts of trust
and partnership between Venetians and Arab merchants in Alexandria. These contractual
forms originated in the Islamic world and eventually spread in Latin Europe through contact
with Muslim scholars and scholars legal experts. Then, the emergence of various forms of
instruments and institutions facilitating the development of commerce and trade in Europe,
such as bills of exchange (siftajah), letters of credit (hawala), specialized trading centers
(funduq) and private banks (ma'una) (see Kramers, 1934:102).
Crusades
The crusades that took place from 1092 to 1292 were a long time for Europe to use to
gain knowledge from the Islamic world. According to Ferruollo, during this period the
Muslim community helped shape European attitudes, feelings and values (see Ferruollo,
1984: 42).
Why Europeans do not recognize that Islamic science is big enough to influence the
development of science in Europe, because (1) Europe in medieval times was known to be
very hostile to the Islamic world. This made it difficult for Europeans to accept the
advantages that had been obtained by the Muslim community (Ghanzanfar, 2002:153); and
(2) Scholars at that time borrowing without telling was a common practice, besides property
rights in the 12th century were not yet recognized. In this regard, the Spanish-era priest of the
Domician order, Raymund Martin - who influenced St. Thomas Aquinas - is known to have
sourced his book Pugio Fidei from al Ghazali's Tahafut al-Falasifa, Maqasid ul-Falasifa, al-
Munqid, Mishkat ul-Anwar, and Ihya Ulumuddin, without citing the references (see Sharif,
1966: 1361)).
If traced further, let alone listen back to how the development of Muslim thought about
Islamic economics that already exists (the author described above) which can be traced since
the life of the Prophet Muhammad SAW. Adam Smith was named the father of modern
economics along with the launch of economic thought in a book entitled 'An Inquiry into the
nature causes the wealth of nations'. From Smith's thought, a tradition of scientific thought
was born Classical economics emphasizes the freedom of market mechanisms in measuring
economic activity (laises faire) without being disturbed by government policies.
Adam Smith gave an example of an economically backward society is the Indians in
North America. While an example of an advanced economic society is the Arabs. The Arabs
Adam Smith meant were certainly a nation of traders in the days of the Prophet. Because in
the next explanation he said that the nation led by Muhammad and the generations after him.
From Adam Smith's explanation, it is clear that he recognized the superiority and
greatness of the Muslim economy in the past. Therefore, it is likely that he has indirectly
adopted Islamic economic theories. The indication shows that the progress of the Islamic
economy in medieval times was felt in England, Adam Smith's homeland, even long before he
was born. In 774 AD, King Offa in England at that time minted gold coins which were a
direct copy of the Islamic dinar, including its Arabic writing. All The writing on the coin is
Arabic, except on one side it says OFFAREX.
This reality shows that the Islamic dinar was then the strongest currency in the world. In
addition, the Muslim economy was far more advanced than Europe. It showed that Muslim
international trade had reached as far as Northern Europe. In 1764, Adam Smith gave up his
professorship in Glasgow England and chose his new career as economic advisor to the Duke
of Buccleuch. It was during this period that Smith traveled extensively abroad, especially to
France. Here he met many famous philosophers. Smith began writing The Wealth of Nations
while he was in France and completed it in 1766, in Kirdcaldy. And ten years later it was
published, namely in 1776. At that time in Europe there were already translated books by
Muslim economists. In fact, in the South of France, many professors were applying the
teaching patterns they had learned from Muslim countries. The explanation above shows that
the role of Muslim scientists is very significant to the rise of European intellectualism,
including in economic thought.
In the next development of classical economic thought was not always able to solve all
the economic problems that are growing increasingly complex, one proof is the emergence of
a severe depression of the world economy ahead of World War II (malaise period). From here
then inspired the birth of economic thought that emphasizes the need for the role of
government in regulating economic activity. This thinking was pioneered by John Maynard
Keynes who is considered a modern economic figure who developed the idea of short-term
economic analysis to encourage economic growth and overcome the problems of
unemployment and inflation.
Contemporary Islamic economic thought can be categorized into three groups of schools
of thought, namely:
Baqir As-Sadr's School
Mainstream Mazhab
Alternative Mazhab
Baqir As-Sadr's School
Scholars who became pioneers of this school are Baqir as- Sadr and Ali Shariati and
scholars from Iran and Iraq. According to As-Sadr's thinking that in studying economics must
be seen from two aspects, namely aspects of philosophy of economics or normative economics
and aspects of positive economics. An example of positive economics, i.e. studying the theory
of consumption and demand which is a common and acceptable phenomenon by anyone
without being influenced by idiology. Meanwhile, from the aspect of phylosophy of
economics which is the result of human thought, it will be found that each human group has
an idiology, a perspective that is not the same. An example is the discussion of 'justice'.
According to the concept of classical capitalism, what is meant by fairness is that you get
what you deserve, meaning 'you get what you have worked for'. Meanwhile, according to
classical socialism, the meaning of 'fair' is that no one has previlege to get more than others,
meaning that no one gets facilities to get more than others, in other words, everyone gets the
same. But Islam has its own meaning in interpreting 'fair' which is laa tadhlimuuna wa laa
tudhlamuuna meaning not to harm each other. So according to Baqir As-sadr's school of
thought, there is a difference in principle between economics and Islamic ideology, Therefore,
there will never be a common ground between Islam and economics.
Economics states that economic problems arise because of the problem of scarcity of
economic resources (scarcity) compared to human needs which are unlimited. In this case, the
school of Baqir As-Sadr rejects the understanding of economic science because in Islam it has
been confirmed that Allah Swt. has created creatures in this world including humans in the
sufficiency of economic resources as stated in His word:1
َ
َقَلَخَ
وََ
لُكَََ
فٍَءْيَش-َ
ُهَر دَقَََت-َْ
يِدْق-اًر
"...........................................................
.......... And He has created all things, and He has measured them out with precision."
Furthermore, according to the school of Baqir As-Sadr, the main problem faced by all
human beings in this world is the problem of unequal distribution of wealth. How the gift
given by Allah SWT to all creatures including humans can be distributed evenly and
proportionally. According to the school of Baqir As-Sadr to realize this, there are several
steps taken, namely:
replacing the term economics with the term iqtishad which implies that it is harmonious,
equal, and balanced (in between).
compile and reconstruct a separate economic science derived from the Qur'an and
Assunnah.
This is the contribution of Baqir As-sadr's school which is quite significant in the
discourse of the development of Islamic economics.
Mainstream Mazhab
Islamic economic thought from the mainstream school of thought is what gives the most
color in the discourse of Islamic economics now because most of its figures from the Islamic
Development Bank (IDB) which has funding facilities and cooperation networks with various
international institutions. The figures of the mainstream school include M. Umer Chapra, M.
A. Mannan, Nejatullah Siddiqi, Khurshid Ahmad, Monzer Kahf etc. equilibrium. But
relatively at a certain time and in a certain place there will still be a problem of scarcity. So
until here there is no difference between conventional economics and Islamic economics. The
difference is only in the mechanism of solving economic problems that according to the
mainstream school must refer to the Qur'an and Assunnah. While in the view of classical
capitalism the solution through the operation of the market mechanism, and classical
socialism through a centralized planning system.
Alternative Mazhab
In contrast to the views of the two previous schools, the alternative school sees that
Baqir as-Sadr's school of thought tries to explore and find a new Islamic economic paradigm
by leaving the conventional economic paradigm. While the mainstream school is considered
to be another face of the neoclassical view by eliminating the element of interest and adding
zakat.
The alternative school led by Prof. Timjur Kura (Chair of the Economics Department at
the University of Southern California), Prof. Jomo and Prof. Muhammad Arief contributes
through critical analysis of economics not only on the views of capitalism and socialism but
also criticizes the development of economic discourse. Islamic economic discourse. They
Islam is a view or ideology that is absolute truth that talks about Islamic economics means
studying human thinking about the verses of God and the sunnah of the Prophet in the
economic aspect. So according to this alternative school of Islamic economics is a
discourse that can still be debated because it is a human interpretation of the Qur'an
and Assunnah that needs to be tested and studied continuously.
Actually there is still one more Islamic economic discourse that is also beginning to
develop in the Islamic world, namely the thought of implementing a gold currency system as
a substitute for paper currency. (which was driven by Dr. Umar Vadillo and the Hisbut Tahrir
activist group) as happened / used during the Abbasid reign, namely the dinar and dirham
(gold and silver) currencies.
However, their thoughts cannot be included in a separate school of thought because they
are relative It is still premature and has not been supported by theoretical foundations and
empirical tests in the context of modern life. Moreover, in economic practice in the field it is
over valued so that instead a currency made of copper called "fulus" was created. Ibn
Taymiyah said: "There is no problem with money not coming from gold and silver as long as
the government is able to maintain its value". Al-Maghribi stated: "If the government prints
money continuously, it means that the government does not maintain the value of the
currency". In another section Ibn Qayyim warned: "If the government continuously prints
money, it can cause usury khafi (hidden usury) in the community, namely usury framed by
buying and selling transactions". This is in accordance with the meaning of the Hadith of the
Prophet, namely "There will come a time when people legalize usury by means of buying
and selling".
Muhammad Nejatullah Siddiqi in his book "Reading in Islamic Economic Thought"
explains the history of Islamic economic thought in four phases, namely:
Phase I: 113 H-451 H/731 M- 1058 M.
Phase II: 450 H-850 H / 1058 M-1446 M.
Phase III: 850 H-1350 H / 1446 M-1932 M.
Phase IV: 1932 AD-present.
In the first phase, it is known that there were 15 Muslim economists who actually
contributed to the development of economic thought, while at the same time there were no
economists from mainland Europe. Known at that time figures such as Abu Yusuf,
Muhammad bin Hasan al-Ahaibani, Harist bin Asan al-Muhadibi, Zaid bin Ali Zainal Abidin
bin Hussein bin Ali bin Abi Talib, Junaid Baghdadi, Ibn Miskawaih, Mawardi, etc.
The discourse that developed at that time was macroeconomic thinking concerning
fiscal policy and state finances as reported in Abu Yusuf's book of Al- Kharaj, which is a
book that is written by Abu Yusuf explains the mechanism for imposing taxes on land. Then
also Abu Ubaid in the book Al-Amwal describes how the management of state finances and
the state budget. In the book Al-Ahkam Al-Sulthaniyah by Mawardi discusses more about the
problem of government administration. And by other Islamic economic thinkers have also
been touched on the operation of unfair market mechanisms.
In the second phase of the development of Islamic economic thought, the discourse on
economics intensively began to develop even though on the other hand it was characterized
by changes in the structure of Islamic power which was getting wider. Several major figures
came to the fore such as Imam Al-Ghozali, Ibn Taymiyah, Ibn Khaldun, Ibn Qayyim. In this
second phase, the scientific discourse was directed more towards microeconomic analysis and
the function of money.
Imam Al-Ghozali addressed the issue of money and its functions. According to Imam
Al-Ghazali, it is not a problem to apply a non-gold and silver currency as long as the
government is able to maintain the stability of the currency as a legal tender. In one of his
writings he said "Money is like a mirror, colorless but can reflect all colors" and he also said
"If money has been traded, then it is the same as imprisoning the function of money", so that if
that happens it will cause depreciation of the currency exchange rate against other currencies.
He also explained about the prohibition of usury fadhl and its impact on the economy. Al-
Ghozali's intensive economic studies also touched on the issue of scales, price control (market
intervention), determination of taxes in an emergency, etc. In some parts of his thought also
touches on how the market mechanism works through the power of demand and supply.
(supply) in determining the market equilibrium.
An example of how to overcome the impact of price increases in order to stabilize
market prices is reflected in the government of Umar bin Khatab when there was inflation
caused by crop failure in the Hijaz area as the center of wheat production. The policy applied
by the government at that time to overcome it was through the market mechanism by
increasing the supply of wheat imported from Fuztadz Egypt so that prices returned to normal.
Conversely, if inflation is caused by market distortions such as monopolistic practices
and market hoarding, then the solution applied is not not by using the market mechanism but
through government intervention. Ibn Taymiyah has long suggested that the government
needs to conduct price intervention at the original equilibrium price to break the behavior of
monopolists and hoarding of goods. In contrast to government intervention, the views of
conventional economists suggest that Price fixing is done at the ceiling price or at the floor
price. Then what about the Prophet's hadith regarding the issue of price increases in Medina at
that time, namely "Allah is the one who determines prices. It is Allah who determines
provision and it is Allah who withholds provision". Apparently it was this hadith that later
inspired some economists to conceptualize the operation of the market mechanism by the
invisible hand. If so, is the proposition put forward by Ibn Taymiyyah regarding price
intervention contrary to the intent of the Prophet's hadith above? The answer is no! because
the direction and purpose of government intervention is so that the equilibrium price in the
market returns to the initial equilibrium position (equilibrium).
The third phase was a period of the rise of European civilization. At that time, 22
economists emerged while at the same time there were only a few Muslim scholars, namely
the Shah of Islam waliAllah with his work Hujjah Allah Al-Balighah which explains how the
provisions of sharia in relation to the behavior of an individual and the arrangement of social
organizations, other scholars are Muhammad Iqbal and Jamaluddin Al- Afghani.
We are familiar with the famous European economists such as JS Mill, Alfred Marshal
who formed the classical capitalist school. Behind them came the names of Karl Marx, Lenin
who gave birth to the socialist school. Then came JM Keynes with his Neo Classical school.
In this phase, economic thought from the West really dominated the world until now.
Meanwhile, Muslim scholars continue to experience moral and intellectual decline so that
most Islamic countries become colonies of western countries.
The fourth phase was characterized by the emergence of a new consciousness among
Muslims. A moral and intellectual awakening among Muslims gave birth to several names
such as Sayyid Qutb, Al- Maududi and Yusuf Qardhawi. However, his thoughts are more
inclined to the approach of fiqh, including the work of scientist Abu al- A'la al-Maududi from
Pakistan. It was not until a decade later that scientific works on Islamic economics began to
appear, especially after the first world conference of Muslims in Mecca in 1976 with the main
theme of Islamic economics (Qardhawi, 1997: 20-21).
Like a sleeping person, the study of Islamic economics as a science at the end of the
1970s was like stumbling awake, and this awakening seems to be related to the trends that
occurred in the world due to the economic crisis of 1974, with the birth of what is called the
flow or monetarist thinking, which further consensus Keynesian began to be abandoned
because it was considered no longer able to overcome the problems of contemporary
economics, this tendency is getting stronger after the collapse of Russia's socialist-communist
economy.
From 1980 until now, the awareness of Muslim thought developed quite rapidly, marked
by the emergence of three schools of Muslim thought, namely the Baqir As-Sadr school
(iqtishoduna), the mainstream school and the alternative school. In this phase, several
prominent names emerged such as MA. Mannan, Annas Zarka, Khurshid Ahmad, Nejatullah
Siddiqi, Hasanus Zaman, etc.
From research conducted by Umer Chapra, for example, it can be seen that the capitalist
economic system that relies on market mechanisms has failed to realize its goals, both
positive goals and normative goals.3 Similar failures achieving 'efficient and fair' economic
activity in the process of allocation and distribution of limited resources. While normative
goals are universal goals based on certain norms from all socio-economic aspects such as fair
income distribution, optimal growth rates etc. that are structured based on religious norms
also experienced by the socialist economic system. Actually, the purpose of the socialist
economic system is to correct various problems found in the capitalist economic system, so
that one of the goals of this socialist economic system is the creation of shared prosperity,
where with the implementation of the system there will no longer be various social classes in
society, economic equality occurs, and society will be free from all kinds of tyranny. This
goal turned out to be a failure, because the designers of the system did not understand what
human beings really meant. In this system, people were treated as cogs in a machine called
the state rather than a system built on the spontaneous and voluntary interactions of individual
economic actors.
Therefore, the development of Islamic economics as an alternative system is very
necessary, and with this alternative economic system the goal of economic activity to achieve
maqosidus shar'iah, which is an effort to improve the quality of economic activity to improve
the welfare of all human beings can be realized. The religious moral element is thus part of
the Islamic economic theory itself, and the Islamic economic mechanism to achieve prosperity
efficiently is built through the values of justice, equity and the development of the fiscal
sector in encouraging economic dynamics.
Conclusion
The above quote shows that Islamic economic thought in classical times was very
advanced and developed before Western scientists discussed it in the 18th-19th centuries. This
fact must be considered by contemporary economists, not only Muslim economists but also
non-Muslim economists around the world. Contribution of Islamic Economics to Modern
Economics In the past three decades, the study and research of Islamic economics has
flourished again. Various international forums on Islamic economics have been held
frequently and widely in various countries, such as conferences seminars, symposiums and
workshops. Dozens of doctors and professors of Islamic economics who are experts in both
conventional and shari'ah economics, appear as speakers in these forums. From their study,
they found that Islamic economic theory is actually not a new science or a science that is
fundamentally derived from modern economic theory that is developing today. Historical
facts show that classical Islamic scientists are the inventors and founders of all scientific
fields, including economics.
Circumstances in each period
There were several circumstances that resulted in the period of khulafa' al- rashidun not
many economists were born, including (1) Al Quran and al Hadith become the main source in
running people's lives. (2) The dominance of policy is more influenced by the attitude of the
leader as a representation of the successor to the Prophet Muhammad. This makes the caliph's
decision a reference in carrying out activities in the social field. (3) The scientific capacity of
each caliph is not the same, the period of leadership of the caliph is relatively different and the
end of his power 3 caliphs ended in political tragedy;. Abu Bakar's caliphate lasted for 2
years, 3 months, 11 days. Umar bin Khattab held the caliphate for 10 years, 6 months, 5 days.
Usman bin Affan ruled for 12 years less 12 days, and Ali bin Abi Talib ruled for 5 years and 3
months (Ahmad, 2000:12). (4) There has not been much friction thought with the Byzantine
(Greek) and Sasanian (Persian) scientific mainstream, because the mastery of Greece and
Persia has not yet reached the process of assimilating scientific potential (see Hodgson, 1999:
287).
While there were not many Muslim thinkers in the field of economics during the
Ummayah dynasty due to, among others; (1) The leader's busyness in expanding new
territories which was quite labor and time consuming. (2) The government system tended to
be Arab-centric, the Arab style was very dominant in the bureaucratic system during the
Ummayah dynasty. Non-Arabs - consisting of Persian descendants - commonly called mawali
were treated as second-class citizens. This situation affected the dialectic between the
bureaucracy and the Persians, in fact, as the more educated people were not so good. (3)
Geographically, Damascus, the capital of the Ummayah dynasty consisted mostly of Arabs, so
it was far from the interaction of the outside world, in contrast to Bagdad, the capital of the
Abbasid dynasty, which was close to Cteshipon, the former capital of the Sassanid empire,
Persia. (see Saefudin, 2002: 30-31)
While progress Islamic thought at period dynasty Abbasid dynasty was caused by; (1)
The contact between Islam and Persia became the development of science and philosophy
because Persia culturally played a major role in the development of the Greek scientific
tradition. (2) There was a great deal of activity in translating Greek literature into Arabic.
According to Mehdi Nakosteen, the translation movement was influenced by the previous
translation movement carried out during the Sassanid Empire, which was centered at the
Jundishapur Academy. This academy was the center for translating Greek and Hindu works of
science and philosophy into Pahlavi. From this school also came some important translations
from Sanskrit, Pahlavi and Syriac into Arabic. (Nakosteen, 1964:33) (3) The relative absence
of territorial clearances and rebellions ensured the stability of the government so that the
government's concentration on promoting intellectual aspects found opportunities. (4) The
existence of heterogeneous civilizations and cultures in Baghdad led to a process of
interaction between one culture and another; Arab, Greek, Persian, and Hindu which had an
impact on intellectual development. Bagdad was also inhabited by the rest of the population
native Chaldaeans and Suryani. (5) Bagdad was considered strategic and profitable because it
was passed by the Tigris and Euphrates rivers. (Saefuddin, 2002: 149) Goods can go in and
out through the river using boats so that Bagdad becomes a bustling economic satellite with
commodities being traded.
Then, the science of economics during the Ummayah or Abbasid era is certainly not as
familiar today. From the above historical developments we can note that (1) Economics is an
integral part of the political, social and cultural life of Islamic society so that economic
thought in the work of Muslim thinkers is difficult to separate from political and cultural
thought. This can be proven by the number of books written by Muslim thinkers who unite
economic problems with social, political and cultural problems. (2) Muslim thinkers are
known as Muslim economists because they have documented works through written works
that can be accessed by generations after him, and or known because there are students of the
Muslim thinker who documented his economic his economic thought. (3) Every Muslim
thinker expresses economic or social, political and cultural issues influenced by the
background of each Muslim thinker's life; residence, country, occupation and others.
The development of Muslim economic thought in Europe
The development of knowledge in the Islamic world influenced the progress of thought
in the European world. The influence to Europe is through several ways as follows:
Travels.
During the 11th and early centuries 12 Several Latin-Scholastic European scholars traveled in
several Arab countries to learn Arabic in order to gain knowledge to bring back to Europe.
During this period many students from Italy, Spain and Southern France attended Muslim
studies to learn mathematics, philosophy, medicine, cosmography, and mathematics other
studies in order to be able to teach in Western universities-which were established after the
studies in the Muslim world (Sharif, 1966:1367).
Translation.
From the 11th to the 14th century, there was a great deal of translation from Arabic to
Latin, not only of Arabic writing, but from Arabic to Hebrew. This was done in Spain, Italy
and France. Some notable translators are known from medieval history such as Adelard of
Bath, Constantine the African, Michael the Sct, Herman the German, Dominic Gundisilavi,
John of Seville, Plato of Trivoli, William of Luna, Gerard of Cremona, and Aflred of Sareshel
(Durant, 1950:910) According to Crombie during the Middle Ages, the translation of Arabic
into Latin was a major undertaking 14th and 15th centuries, Scholastic Europe was also not
directly influenced by the legacy of European thinkers, they still used the knowledge of
Muslim thinkers (see Crombie, 1963: 30).
Oral Tradition
Other important influential sources in the oral tradition are insufficiently available.
According to Chejne that specifically for Oral tradition is an important factor, and this is
evidenced by the literary relationship between the Arabs and the West. According to Chejne,
oral transmission took place over a long period of time and relations were maintained between
Muslims and Christians by being bilingual in Spanish. (see Chejne, 1980:111)
Trade
Some authors point out that trade brought the Arab world through Russian roads to
Polania, the Baltic, Scadinavia, central-western Europe and Iceland. Through trade resulting
in the spread of economic institutions, Arab money was used in the Christian Kingdom of the
North, where there had been no coins for 400 years. (see Hitti, 1943:144)
Diffusion and Institutions
Udovich reports that by the 15th century, there were already various contracts of trust
and partnership between Venetians and Arab merchants in Alexandria. These contractual
forms originated in the Islamic world and eventually spread in Latin Europe through contact
with Muslim scholars and scholars legal experts. Then, the emergence of various forms of
instruments and institutions facilitating the development of commerce and trade in Europe,
such as bills of exchange (siftajah), letters of credit (hawala), specialized trading centers
(funduq) and private banks (ma'una) (see Kramers, 1934:102).
Crusades
The crusades that took place from 1092 to 1292 were a long time for Europe to use to
gain knowledge from the Islamic world. According to Ferruollo, during this period the
Muslim community helped shape European attitudes, feelings and values (see Ferruollo,
1984: 42).
Why Europeans do not recognize that Islamic science is big enough to influence the
development of science in Europe, because (1) Europe in medieval times was known to be
very hostile to the Islamic world. This made it difficult for Europeans to accept the
advantages that had been obtained by the Muslim community (Ghanzanfar, 2002:153); and
(2) Scholars at that time borrowing without telling was a common practice, besides property
rights in the 12th century were not yet recognized. In this regard, the Spanish-era priest of the
Domician order, Raymund Martin - who influenced St. Thomas Aquinas - is known to have
sourced his book Pugio Fidei from al Ghazali's Tahafut al-Falasifa, Maqasid ul-Falasifa, al-
Munqid, Mishkat ul-Anwar, and Ihya Ulumuddin, without citing the references (see Sharif,
1966: 1361)).
If traced further, let alone listen back to how the development of Muslim thought about
Islamic economics that already exists (the author described above) which can be traced since
the life of the Prophet Muhammad SAW. Adam Smith was named the father of modern
economics along with the launch of economic thought in a book entitled 'An Inquiry into the
nature causes the wealth of nations'. From Smith's thought, a tradition of scientific thought
was born Classical economics emphasizes the freedom of market mechanisms in measuring
economic activity (laises faire) without being disturbed by government policies.
Adam Smith gave an example of an economically backward society is the Indians in
North America. While an example of an advanced economic society is the Arabs. The Arabs
Adam Smith meant were certainly a nation of traders in the days of the Prophet. Because in
the next explanation he said that the nation led by Muhammad and the generations after him.
From Adam Smith's explanation, it is clear that he recognized the superiority and
greatness of the Muslim economy in the past. Therefore, it is likely that he has indirectly
adopted Islamic economic theories. The indication shows that the progress of the Islamic
economy in medieval times was felt in England, Adam Smith's homeland, even long before he
was born. In 774 AD, King Offa in England at that time minted gold coins which were a
direct copy of the Islamic dinar, including its Arabic writing. All The writing on the coin is
Arabic, except on one side it says OFFAREX.
This reality shows that the Islamic dinar was then the strongest currency in the world. In
addition, the Muslim economy was far more advanced than Europe. It showed that Muslim
international trade had reached as far as Northern Europe. In 1764, Adam Smith gave up his
professorship in Glasgow England and chose his new career as economic advisor to the Duke
of Buccleuch. It was during this period that Smith traveled extensively abroad, especially to
France. Here he met many famous philosophers. Smith began writing The Wealth of Nations
while he was in France and completed it in 1766, in Kirdcaldy. And ten years later it was
published, namely in 1776. At that time in Europe there were already translated books by
Muslim economists. In fact, in the South of France, many professors were applying the
teaching patterns they had learned from Muslim countries. The explanation above shows that
the role of Muslim scientists is very significant to the rise of European intellectualism,
including in economic thought.
In the next development of classical economic thought was not always able to solve all
the economic problems that are growing increasingly complex, one proof is the emergence of
a severe depression of the world economy ahead of World War II (malaise period). From here
then inspired the birth of economic thought that emphasizes the need for the role of
government in regulating economic activity. This thinking was pioneered by John Maynard
Keynes who is considered a modern economic figure who developed the idea of short-term
economic analysis to encourage economic growth and overcome the problems of
unemployment and inflation.
Contemporary Islamic economic thought can be categorized into three groups of schools
of thought, namely:
Baqir As-Sadr's School
Mainstream Mazhab
Alternative Mazhab
Baqir As-Sadr's School
Scholars who became pioneers of this school are Baqir as- Sadr and Ali Shariati and
scholars from Iran and Iraq. According to As-Sadr's thinking that in studying economics must
be seen from two aspects, namely aspects of philosophy of economics or normative economics
and aspects of positive economics. An example of positive economics, i.e. studying the theory
of consumption and demand which is a common and acceptable phenomenon by anyone
without being influenced by idiology. Meanwhile, from the aspect of phylosophy of
economics which is the result of human thought, it will be found that each human group has
an idiology, a perspective that is not the same. An example is the discussion of 'justice'.
According to the concept of classical capitalism, what is meant by fairness is that you get
what you deserve, meaning 'you get what you have worked for'. Meanwhile, according to
classical socialism, the meaning of 'fair' is that no one has previlege to get more than others,
meaning that no one gets facilities to get more than others, in other words, everyone gets the
same. But Islam has its own meaning in interpreting 'fair' which is laa tadhlimuuna wa laa
tudhlamuuna meaning not to harm each other. So according to Baqir As-sadr's school of
thought, there is a difference in principle between economics and Islamic ideology, Therefore,
there will never be a common ground between Islam and economics.
Economics states that economic problems arise because of the problem of scarcity of
economic resources (scarcity) compared to human needs which are unlimited. In this case, the
school of Baqir As-Sadr rejects the understanding of economic science because in Islam it has
been confirmed that Allah Swt. has created creatures in this world including humans in the
sufficiency of economic resources as stated in His word:1
َ
َقَلَخَ
وََ
لُكَََ
فٍَءْيَش-َ
ُهَر دَقَََت-َْ
يِدْق-اًر
"...........................................................
.......... And He has created all things, and He has measured them out with precision."
Furthermore, according to the school of Baqir As-Sadr, the main problem faced by all
human beings in this world is the problem of unequal distribution of wealth. How the gift
given by Allah SWT to all creatures including humans can be distributed evenly and
proportionally. According to the school of Baqir As-Sadr to realize this, there are several
steps taken, namely:
replacing the term economics with the term iqtishad which implies that it is harmonious,
equal, and balanced (in between).
compile and reconstruct a separate economic science derived from the Qur'an and
Assunnah.
This is the contribution of Baqir As-sadr's school which is quite significant in the
discourse of the development of Islamic economics.
Mainstream Mazhab
Islamic economic thought from the mainstream school of thought is what gives the most
color in the discourse of Islamic economics now because most of its figures from the Islamic
Development Bank (IDB) which has funding facilities and cooperation networks with various
international institutions. The figures of the mainstream school include M. Umer Chapra, M.
A. Mannan, Nejatullah Siddiqi, Khurshid Ahmad, Monzer Kahf etc. equilibrium. But
relatively at a certain time and in a certain place there will still be a problem of scarcity. So
until here there is no difference between conventional economics and Islamic economics. The
difference is only in the mechanism of solving economic problems that according to the
mainstream school must refer to the Qur'an and Assunnah. While in the view of classical
capitalism the solution through the operation of the market mechanism, and classical
socialism through a centralized planning system.
Alternative Mazhab
In contrast to the views of the two previous schools, the alternative school sees that
Baqir as-Sadr's school of thought tries to explore and find a new Islamic economic paradigm
by leaving the conventional economic paradigm. While the mainstream school is considered
to be another face of the neoclassical view by eliminating the element of interest and adding
zakat.
The alternative school led by Prof. Timjur Kura (Chair of the Economics Department at
the University of Southern California), Prof. Jomo and Prof. Muhammad Arief contributes
through critical analysis of economics not only on the views of capitalism and socialism but
also criticizes the development of economic discourse. Islamic economic discourse. They
Islam is a view or ideology that is absolute truth that talks about Islamic economics means
studying human thinking about the verses of God and the sunnah of the Prophet in the
economic aspect. So according to this alternative school of Islamic economics is a
discourse that can still be debated because it is a human interpretation of the Qur'an
and Assunnah that needs to be tested and studied continuously.
Actually there is still one more Islamic economic discourse that is also beginning to
develop in the Islamic world, namely the thought of implementing a gold currency system as
a substitute for paper currency. (which was driven by Dr. Umar Vadillo and the Hisbut Tahrir
activist group) as happened / used during the Abbasid reign, namely the dinar and dirham
(gold and silver) currencies.
However, their thoughts cannot be included in a separate school of thought because they
are relative It is still premature and has not been supported by theoretical foundations and
empirical tests in the context of modern life. Moreover, in economic practice in the field it is
over valued so that instead a currency made of copper called "fulus" was created. Ibn
Taymiyah said: "There is no problem with money not coming from gold and silver as long as
the government is able to maintain its value". Al-Maghribi stated: "If the government prints
money continuously, it means that the government does not maintain the value of the
currency". In another section Ibn Qayyim warned: "If the government continuously prints
money, it can cause usury khafi (hidden usury) in the community, namely usury framed by
buying and selling transactions". This is in accordance with the meaning of the Hadith of the
Prophet, namely "There will come a time when people legalize usury by means of buying
and selling".
Muhammad Nejatullah Siddiqi in his book "Reading in Islamic Economic Thought"
explains the history of Islamic economic thought in four phases, namely:
Phase I: 113 H-451 H/731 M- 1058 M.
Phase II: 450 H-850 H / 1058 M-1446 M.
Phase III: 850 H-1350 H / 1446 M-1932 M.
Phase IV: 1932 AD-present.
In the first phase, it is known that there were 15 Muslim economists who actually
contributed to the development of economic thought, while at the same time there were no
economists from mainland Europe. Known at that time figures such as Abu Yusuf,
Muhammad bin Hasan al-Ahaibani, Harist bin Asan al-Muhadibi, Zaid bin Ali Zainal Abidin
bin Hussein bin Ali bin Abi Talib, Junaid Baghdadi, Ibn Miskawaih, Mawardi, etc.
The discourse that developed at that time was macroeconomic thinking concerning
fiscal policy and state finances as reported in Abu Yusuf's book of Al- Kharaj, which is a
book that is written by Abu Yusuf explains the mechanism for imposing taxes on land. Then
also Abu Ubaid in the book Al-Amwal describes how the management of state finances and
the state budget. In the book Al-Ahkam Al-Sulthaniyah by Mawardi discusses more about the
problem of government administration. And by other Islamic economic thinkers have also
been touched on the operation of unfair market mechanisms.
In the second phase of the development of Islamic economic thought, the discourse on
economics intensively began to develop even though on the other hand it was characterized
by changes in the structure of Islamic power which was getting wider. Several major figures
came to the fore such as Imam Al-Ghozali, Ibn Taymiyah, Ibn Khaldun, Ibn Qayyim. In this
second phase, the scientific discourse was directed more towards microeconomic analysis and
the function of money.
Imam Al-Ghozali addressed the issue of money and its functions. According to Imam
Al-Ghazali, it is not a problem to apply a non-gold and silver currency as long as the
government is able to maintain the stability of the currency as a legal tender. In one of his
writings he said "Money is like a mirror, colorless but can reflect all colors" and he also said
"If money has been traded, then it is the same as imprisoning the function of money", so that if
that happens it will cause depreciation of the currency exchange rate against other currencies.
He also explained about the prohibition of usury fadhl and its impact on the economy. Al-
Ghozali's intensive economic studies also touched on the issue of scales, price control (market
intervention), determination of taxes in an emergency, etc. In some parts of his thought also
touches on how the market mechanism works through the power of demand and supply.
(supply) in determining the market equilibrium.
An example of how to overcome the impact of price increases in order to stabilize
market prices is reflected in the government of Umar bin Khatab when there was inflation
caused by crop failure in the Hijaz area as the center of wheat production. The policy applied
by the government at that time to overcome it was through the market mechanism by
increasing the supply of wheat imported from Fuztadz Egypt so that prices returned to normal.
Conversely, if inflation is caused by market distortions such as monopolistic practices
and market hoarding, then the solution applied is not not by using the market mechanism but
through government intervention. Ibn Taymiyah has long suggested that the government
needs to conduct price intervention at the original equilibrium price to break the behavior of
monopolists and hoarding of goods. In contrast to government intervention, the views of
conventional economists suggest that Price fixing is done at the ceiling price or at the floor
price. Then what about the Prophet's hadith regarding the issue of price increases in Medina at
that time, namely "Allah is the one who determines prices. It is Allah who determines
provision and it is Allah who withholds provision". Apparently it was this hadith that later
inspired some economists to conceptualize the operation of the market mechanism by the
invisible hand. If so, is the proposition put forward by Ibn Taymiyyah regarding price
intervention contrary to the intent of the Prophet's hadith above? The answer is no! because
the direction and purpose of government intervention is so that the equilibrium price in the
market returns to the initial equilibrium position (equilibrium).
The third phase was a period of the rise of European civilization. At that time, 22
economists emerged while at the same time there were only a few Muslim scholars, namely
the Shah of Islam waliAllah with his work Hujjah Allah Al-Balighah which explains how the
provisions of sharia in relation to the behavior of an individual and the arrangement of social
organizations, other scholars are Muhammad Iqbal and Jamaluddin Al- Afghani.
We are familiar with the famous European economists such as JS Mill, Alfred Marshal
who formed the classical capitalist school. Behind them came the names of Karl Marx, Lenin
who gave birth to the socialist school. Then came JM Keynes with his Neo Classical school.
In this phase, economic thought from the West really dominated the world until now.
Meanwhile, Muslim scholars continue to experience moral and intellectual decline so that
most Islamic countries become colonies of western countries.
The fourth phase was characterized by the emergence of a new consciousness among
Muslims. A moral and intellectual awakening among Muslims gave birth to several names
such as Sayyid Qutb, Al- Maududi and Yusuf Qardhawi. However, his thoughts are more
inclined to the approach of fiqh, including the work of scientist Abu al- A'la al-Maududi from
Pakistan. It was not until a decade later that scientific works on Islamic economics began to
appear, especially after the first world conference of Muslims in Mecca in 1976 with the main
theme of Islamic economics (Qardhawi, 1997: 20-21).
Like a sleeping person, the study of Islamic economics as a science at the end of the
1970s was like stumbling awake, and this awakening seems to be related to the trends that
occurred in the world due to the economic crisis of 1974, with the birth of what is called the
flow or monetarist thinking, which further consensus Keynesian began to be abandoned
because it was considered no longer able to overcome the problems of contemporary
economics, this tendency is getting stronger after the collapse of Russia's socialist-communist
economy.
From 1980 until now, the awareness of Muslim thought developed quite rapidly, marked
by the emergence of three schools of Muslim thought, namely the Baqir As-Sadr school
(iqtishoduna), the mainstream school and the alternative school. In this phase, several
prominent names emerged such as MA. Mannan, Annas Zarka, Khurshid Ahmad, Nejatullah
Siddiqi, Hasanus Zaman, etc.
From research conducted by Umer Chapra, for example, it can be seen that the capitalist
economic system that relies on market mechanisms has failed to realize its goals, both
positive goals and normative goals.3 Similar failures achieving 'efficient and fair' economic
activity in the process of allocation and distribution of limited resources. While normative
goals are universal goals based on certain norms from all socio-economic aspects such as fair
income distribution, optimal growth rates etc. that are structured based on religious norms
also experienced by the socialist economic system. Actually, the purpose of the socialist
economic system is to correct various problems found in the capitalist economic system, so
that one of the goals of this socialist economic system is the creation of shared prosperity,
where with the implementation of the system there will no longer be various social classes in
society, economic equality occurs, and society will be free from all kinds of tyranny. This
goal turned out to be a failure, because the designers of the system did not understand what
human beings really meant. In this system, people were treated as cogs in a machine called
the state rather than a system built on the spontaneous and voluntary interactions of individual
economic actors.
Therefore, the development of Islamic economics as an alternative system is very
necessary, and with this alternative economic system the goal of economic activity to achieve
maqosidus shar'iah, which is an effort to improve the quality of economic activity to improve
the welfare of all human beings can be realized. The religious moral element is thus part of
the Islamic economic theory itself, and the Islamic economic mechanism to achieve prosperity
efficiently is built through the values of justice, equity and the development of the fiscal
sector in encouraging economic dynamics.
Conclusion
The above quote shows that Islamic economic thought in classical times was very
advanced and developed before Western scientists discussed it in the 18th-19th centuries. This
fact must be considered by contemporary economists, not only Muslim economists but also
non-Muslim economists around the world. Contribution of Islamic Economics to Modern
Economics In the past three decades, the study and research of Islamic economics has
flourished again. Various international forums on Islamic economics have been held
frequently and widely in various countries, such as conferences seminars, symposiums and
workshops. Dozens of doctors and professors of Islamic economics who are experts in both
conventional and shari'ah economics, appear as speakers in these forums. From their study,
they found that Islamic economic theory is actually not a new science or a science that is
fundamentally derived from modern economic theory that is developing today. Historical
facts show that classical Islamic scientists are the inventors and founders of all scientific
fields, including economics.
Circumstances in each period
There were several circumstances that resulted in the period of khulafa' al- rashidun not
many economists were born, including (1) Al Quran and al Hadith become the main source in
running people's lives. (2) The dominance of policy is more influenced by the attitude of the
leader as a representation of the successor to the Prophet Muhammad. This makes the caliph's
decision a reference in carrying out activities in the social field. (3) The scientific capacity of
each caliph is not the same, the period of leadership of the caliph is relatively different and the
end of his power 3 caliphs ended in political tragedy;. Abu Bakar's caliphate lasted for 2
years, 3 months, 11 days. Umar bin Khattab held the caliphate for 10 years, 6 months, 5 days.
Usman bin Affan ruled for 12 years less 12 days, and Ali bin Abi Talib ruled for 5 years and 3
months (Ahmad, 2000:12). (4) There has not been much friction thought with the Byzantine
(Greek) and Sasanian (Persian) scientific mainstream, because the mastery of Greece and
Persia has not yet reached the process of assimilating scientific potential (see Hodgson, 1999:
287).
While there were not many Muslim thinkers in the field of economics during the
Ummayah dynasty due to, among others; (1) The leader's busyness in expanding new
territories which was quite labor and time consuming. (2) The government system tended to
be Arab-centric, the Arab style was very dominant in the bureaucratic system during the
Ummayah dynasty. Non-Arabs - consisting of Persian descendants - commonly called mawali
were treated as second-class citizens. This situation affected the dialectic between the
bureaucracy and the Persians, in fact, as the more educated people were not so good. (3)
Geographically, Damascus, the capital of the Ummayah dynasty consisted mostly of Arabs, so
it was far from the interaction of the outside world, in contrast to Bagdad, the capital of the
Abbasid dynasty, which was close to Cteshipon, the former capital of the Sassanid empire,
Persia. (see Saefudin, 2002: 30-31)
While progress Islamic thought at period dynasty Abbasid dynasty was caused by; (1)
The contact between Islam and Persia became the development of science and philosophy
because Persia culturally played a major role in the development of the Greek scientific
tradition. (2) There was a great deal of activity in translating Greek literature into Arabic.
According to Mehdi Nakosteen, the translation movement was influenced by the previous
translation movement carried out during the Sassanid Empire, which was centered at the
Jundishapur Academy. This academy was the center for translating Greek and Hindu works of
science and philosophy into Pahlavi. From this school also came some important translations
from Sanskrit, Pahlavi and Syriac into Arabic. (Nakosteen, 1964:33) (3) The relative absence
of territorial clearances and rebellions ensured the stability of the government so that the
government's concentration on promoting intellectual aspects found opportunities. (4) The
existence of heterogeneous civilizations and cultures in Baghdad led to a process of
interaction between one culture and another; Arab, Greek, Persian, and Hindu which had an
impact on intellectual development. Bagdad was also inhabited by the rest of the population
native Chaldaeans and Suryani. (5) Bagdad was considered strategic and profitable because it
was passed by the Tigris and Euphrates rivers. (Saefuddin, 2002: 149) Goods can go in and
out through the river using boats so that Bagdad becomes a bustling economic satellite with
commodities being traded.
Then, the science of economics during the Ummayah or Abbasid era is certainly not as
familiar today. From the above historical developments we can note that (1) Economics is an
integral part of the political, social and cultural life of Islamic society so that economic
thought in the work of Muslim thinkers is difficult to separate from political and cultural
thought. This can be proven by the number of books written by Muslim thinkers who unite
economic problems with social, political and cultural problems. (2) Muslim thinkers are
known as Muslim economists because they have documented works through written works
that can be accessed by generations after him, and or known because there are students of the
Muslim thinker who documented his economic his economic thought. (3) Every Muslim
thinker expresses economic or social, political and cultural issues influenced by the
background of each Muslim thinker's life; residence, country, occupation and others.
The development of Muslim economic thought in Europe
The development of knowledge in the Islamic world influenced the progress of thought
in the European world. The influence to Europe is through several ways as follows:
Travels.
During the 11th and early centuries 12 Several Latin-Scholastic European scholars traveled in
several Arab countries to learn Arabic in order to gain knowledge to bring back to Europe.
During this period many students from Italy, Spain and Southern France attended Muslim
studies to learn mathematics, philosophy, medicine, cosmography, and mathematics other
studies in order to be able to teach in Western universities-which were established after the
studies in the Muslim world (Sharif, 1966:1367).
Translation.
From the 11th to the 14th century, there was a great deal of translation from Arabic to
Latin, not only of Arabic writing, but from Arabic to Hebrew. This was done in Spain, Italy
and France. Some notable translators are known from medieval history such as Adelard of
Bath, Constantine the African, Michael the Sct, Herman the German, Dominic Gundisilavi,
John of Seville, Plato of Trivoli, William of Luna, Gerard of Cremona, and Aflred of Sareshel
(Durant, 1950:910) According to Crombie during the Middle Ages, the translation of Arabic
into Latin was a major undertaking 14th and 15th centuries, Scholastic Europe was also not
directly influenced by the legacy of European thinkers, they still used the knowledge of
Muslim thinkers (see Crombie, 1963: 30).
Oral Tradition
Other important influential sources in the oral tradition are insufficiently available.
According to Chejne that specifically for Oral tradition is an important factor, and this is
evidenced by the literary relationship between the Arabs and the West. According to Chejne,
oral transmission took place over a long period of time and relations were maintained between
Muslims and Christians by being bilingual in Spanish. (see Chejne, 1980:111)
Trade
Some authors point out that trade brought the Arab world through Russian roads to
Polania, the Baltic, Scadinavia, central-western Europe and Iceland. Through trade resulting
in the spread of economic institutions, Arab money was used in the Christian Kingdom of the
North, where there had been no coins for 400 years. (see Hitti, 1943:144)
Diffusion and Institutions
Udovich reports that by the 15th century, there were already various contracts of trust
and partnership between Venetians and Arab merchants in Alexandria. These contractual
forms originated in the Islamic world and eventually spread in Latin Europe through contact
with Muslim scholars and scholars legal experts. Then, the emergence of various forms of
instruments and institutions facilitating the development of commerce and trade in Europe,
such as bills of exchange (siftajah), letters of credit (hawala), specialized trading centers
(funduq) and private banks (ma'una) (see Kramers, 1934:102).
Crusades
The crusades that took place from 1092 to 1292 were a long time for Europe to use to
gain knowledge from the Islamic world. According to Ferruollo, during this period the
Muslim community helped shape European attitudes, feelings and values (see Ferruollo,
1984: 42).
Why Europeans do not recognize that Islamic science is big enough to influence the
development of science in Europe, because (1) Europe in medieval times was known to be
very hostile to the Islamic world. This made it difficult for Europeans to accept the
advantages that had been obtained by the Muslim community (Ghanzanfar, 2002:153); and
(2) Scholars at that time borrowing without telling was a common practice, besides property
rights in the 12th century were not yet recognized. In this regard, the Spanish-era priest of the
Domician order, Raymund Martin - who influenced St. Thomas Aquinas - is known to have
sourced his book Pugio Fidei from al Ghazali's Tahafut al-Falasifa, Maqasid ul-Falasifa, al-
Munqid, Mishkat ul-Anwar, and Ihya Ulumuddin, without citing the references (see Sharif,
1966: 1361)).
If traced further, let alone listen back to how the development of Muslim thought about
Islamic economics that already exists (the author described above) which can be traced since
the life of the Prophet Muhammad SAW. Adam Smith was named the father of modern
economics along with the launch of economic thought in a book entitled 'An Inquiry into the
nature causes the wealth of nations'. From Smith's thought, a tradition of scientific thought
was born Classical economics emphasizes the freedom of market mechanisms in measuring
economic activity (laises faire) without being disturbed by government policies.
Adam Smith gave an example of an economically backward society is the Indians in
North America. While an example of an advanced economic society is the Arabs. The Arabs
Adam Smith meant were certainly a nation of traders in the days of the Prophet. Because in
the next explanation he said that the nation led by Muhammad and the generations after him.
From Adam Smith's explanation, it is clear that he recognized the superiority and
greatness of the Muslim economy in the past. Therefore, it is likely that he has indirectly
adopted Islamic economic theories. The indication shows that the progress of the Islamic
economy in medieval times was felt in England, Adam Smith's homeland, even long before he
was born. In 774 AD, King Offa in England at that time minted gold coins which were a
direct copy of the Islamic dinar, including its Arabic writing. All The writing on the coin is
Arabic, except on one side it says OFFAREX.
This reality shows that the Islamic dinar was then the strongest currency in the world. In
addition, the Muslim economy was far more advanced than Europe. It showed that Muslim
international trade had reached as far as Northern Europe. In 1764, Adam Smith gave up his
professorship in Glasgow England and chose his new career as economic advisor to the Duke
of Buccleuch. It was during this period that Smith traveled extensively abroad, especially to
France. Here he met many famous philosophers. Smith began writing The Wealth of Nations
while he was in France and completed it in 1766, in Kirdcaldy. And ten years later it was
published, namely in 1776. At that time in Europe there were already translated books by
Muslim economists. In fact, in the South of France, many professors were applying the
teaching patterns they had learned from Muslim countries. The explanation above shows that
the role of Muslim scientists is very significant to the rise of European intellectualism,
including in economic thought.
In the next development of classical economic thought was not always able to solve all
the economic problems that are growing increasingly complex, one proof is the emergence of
a severe depression of the world economy ahead of World War II (malaise period). From here
then inspired the birth of economic thought that emphasizes the need for the role of
government in regulating economic activity. This thinking was pioneered by John Maynard
Keynes who is considered a modern economic figure who developed the idea of short-term
economic analysis to encourage economic growth and overcome the problems of
unemployment and inflation.
Contemporary Islamic economic thought can be categorized into three groups of schools
of thought, namely:
Baqir As-Sadr's School
Mainstream Mazhab
Alternative Mazhab
Baqir As-Sadr's School
Scholars who became pioneers of this school are Baqir as- Sadr and Ali Shariati and
scholars from Iran and Iraq. According to As-Sadr's thinking that in studying economics must
be seen from two aspects, namely aspects of philosophy of economics or normative economics
and aspects of positive economics. An example of positive economics, i.e. studying the theory
of consumption and demand which is a common and acceptable phenomenon by anyone
without being influenced by idiology. Meanwhile, from the aspect of phylosophy of
economics which is the result of human thought, it will be found that each human group has
an idiology, a perspective that is not the same. An example is the discussion of 'justice'.
According to the concept of classical capitalism, what is meant by fairness is that you get
what you deserve, meaning 'you get what you have worked for'. Meanwhile, according to
classical socialism, the meaning of 'fair' is that no one has previlege to get more than others,
meaning that no one gets facilities to get more than others, in other words, everyone gets the
same. But Islam has its own meaning in interpreting 'fair' which is laa tadhlimuuna wa laa
tudhlamuuna meaning not to harm each other. So according to Baqir As-sadr's school of
thought, there is a difference in principle between economics and Islamic ideology, Therefore,
there will never be a common ground between Islam and economics.
Economics states that economic problems arise because of the problem of scarcity of
economic resources (scarcity) compared to human needs which are unlimited. In this case, the
school of Baqir As-Sadr rejects the understanding of economic science because in Islam it has
been confirmed that Allah Swt. has created creatures in this world including humans in the
sufficiency of economic resources as stated in His word:1
َ
َقَلَخَ
وََ
لُكَََ
فٍَءْيَش-َ
ُهَر دَقَََت-َْ
يِدْق-اًر
"...........................................................
.......... And He has created all things, and He has measured them out with precision."
Furthermore, according to the school of Baqir As-Sadr, the main problem faced by all
human beings in this world is the problem of unequal distribution of wealth. How the gift
given by Allah SWT to all creatures including humans can be distributed evenly and
proportionally. According to the school of Baqir As-Sadr to realize this, there are several
steps taken, namely:
replacing the term economics with the term iqtishad which implies that it is harmonious,
equal, and balanced (in between).
compile and reconstruct a separate economic science derived from the Qur'an and
Assunnah.
This is the contribution of Baqir As-sadr's school which is quite significant in the
discourse of the development of Islamic economics.
Mainstream Mazhab
Islamic economic thought from the mainstream school of thought is what gives the most
color in the discourse of Islamic economics now because most of its figures from the Islamic
Development Bank (IDB) which has funding facilities and cooperation networks with various
international institutions. The figures of the mainstream school include M. Umer Chapra, M.
A. Mannan, Nejatullah Siddiqi, Khurshid Ahmad, Monzer Kahf etc. equilibrium. But
relatively at a certain time and in a certain place there will still be a problem of scarcity. So
until here there is no difference between conventional economics and Islamic economics. The
difference is only in the mechanism of solving economic problems that according to the
mainstream school must refer to the Qur'an and Assunnah. While in the view of classical
capitalism the solution through the operation of the market mechanism, and classical
socialism through a centralized planning system.
Alternative Mazhab
In contrast to the views of the two previous schools, the alternative school sees that
Baqir as-Sadr's school of thought tries to explore and find a new Islamic economic paradigm
by leaving the conventional economic paradigm. While the mainstream school is considered
to be another face of the neoclassical view by eliminating the element of interest and adding
zakat.
The alternative school led by Prof. Timjur Kura (Chair of the Economics Department at
the University of Southern California), Prof. Jomo and Prof. Muhammad Arief contributes
through critical analysis of economics not only on the views of capitalism and socialism but
also criticizes the development of economic discourse. Islamic economic discourse. They
Islam is a view or ideology that is absolute truth that talks about Islamic economics means
studying human thinking about the verses of God and the sunnah of the Prophet in the
economic aspect. So according to this alternative school of Islamic economics is a
discourse that can still be debated because it is a human interpretation of the Qur'an
and Assunnah that needs to be tested and studied continuously.
Actually there is still one more Islamic economic discourse that is also beginning to
develop in the Islamic world, namely the thought of implementing a gold currency system as
a substitute for paper currency. (which was driven by Dr. Umar Vadillo and the Hisbut Tahrir
activist group) as happened / used during the Abbasid reign, namely the dinar and dirham
(gold and silver) currencies.
However, their thoughts cannot be included in a separate school of thought because they
are relative It is still premature and has not been supported by theoretical foundations and
empirical tests in the context of modern life. Moreover, in economic practice in the field it is
over valued so that instead a currency made of copper called "fulus" was created. Ibn
Taymiyah said: "There is no problem with money not coming from gold and silver as long as
the government is able to maintain its value". Al-Maghribi stated: "If the government prints
money continuously, it means that the government does not maintain the value of the
currency". In another section Ibn Qayyim warned: "If the government continuously prints
money, it can cause usury khafi (hidden usury) in the community, namely usury framed by
buying and selling transactions". This is in accordance with the meaning of the Hadith of the
Prophet, namely "There will come a time when people legalize usury by means of buying
and selling".
Muhammad Nejatullah Siddiqi in his book "Reading in Islamic Economic Thought"
explains the history of Islamic economic thought in four phases, namely:
Phase I: 113 H-451 H/731 M- 1058 M.
Phase II: 450 H-850 H / 1058 M-1446 M.
Phase III: 850 H-1350 H / 1446 M-1932 M.
Phase IV: 1932 AD-present.
In the first phase, it is known that there were 15 Muslim economists who actually
contributed to the development of economic thought, while at the same time there were no
economists from mainland Europe. Known at that time figures such as Abu Yusuf,
Muhammad bin Hasan al-Ahaibani, Harist bin Asan al-Muhadibi, Zaid bin Ali Zainal Abidin
bin Hussein bin Ali bin Abi Talib, Junaid Baghdadi, Ibn Miskawaih, Mawardi, etc.
The discourse that developed at that time was macroeconomic thinking concerning
fiscal policy and state finances as reported in Abu Yusuf's book of Al- Kharaj, which is a
book that is written by Abu Yusuf explains the mechanism for imposing taxes on land. Then
also Abu Ubaid in the book Al-Amwal describes how the management of state finances and
the state budget. In the book Al-Ahkam Al-Sulthaniyah by Mawardi discusses more about the
problem of government administration. And by other Islamic economic thinkers have also
been touched on the operation of unfair market mechanisms.
In the second phase of the development of Islamic economic thought, the discourse on
economics intensively began to develop even though on the other hand it was characterized
by changes in the structure of Islamic power which was getting wider. Several major figures
came to the fore such as Imam Al-Ghozali, Ibn Taymiyah, Ibn Khaldun, Ibn Qayyim. In this
second phase, the scientific discourse was directed more towards microeconomic analysis and
the function of money.
Imam Al-Ghozali addressed the issue of money and its functions. According to Imam
Al-Ghazali, it is not a problem to apply a non-gold and silver currency as long as the
government is able to maintain the stability of the currency as a legal tender. In one of his
writings he said "Money is like a mirror, colorless but can reflect all colors" and he also said
"If money has been traded, then it is the same as imprisoning the function of money", so that if
that happens it will cause depreciation of the currency exchange rate against other currencies.
He also explained about the prohibition of usury fadhl and its impact on the economy. Al-
Ghozali's intensive economic studies also touched on the issue of scales, price control (market
intervention), determination of taxes in an emergency, etc. In some parts of his thought also
touches on how the market mechanism works through the power of demand and supply.
(supply) in determining the market equilibrium.
An example of how to overcome the impact of price increases in order to stabilize
market prices is reflected in the government of Umar bin Khatab when there was inflation
caused by crop failure in the Hijaz area as the center of wheat production. The policy applied
by the government at that time to overcome it was through the market mechanism by
increasing the supply of wheat imported from Fuztadz Egypt so that prices returned to normal.
Conversely, if inflation is caused by market distortions such as monopolistic practices
and market hoarding, then the solution applied is not not by using the market mechanism but
through government intervention. Ibn Taymiyah has long suggested that the government
needs to conduct price intervention at the original equilibrium price to break the behavior of
monopolists and hoarding of goods. In contrast to government intervention, the views of
conventional economists suggest that Price fixing is done at the ceiling price or at the floor
price. Then what about the Prophet's hadith regarding the issue of price increases in Medina at
that time, namely "Allah is the one who determines prices. It is Allah who determines
provision and it is Allah who withholds provision". Apparently it was this hadith that later
inspired some economists to conceptualize the operation of the market mechanism by the
invisible hand. If so, is the proposition put forward by Ibn Taymiyyah regarding price
intervention contrary to the intent of the Prophet's hadith above? The answer is no! because
the direction and purpose of government intervention is so that the equilibrium price in the
market returns to the initial equilibrium position (equilibrium).
The third phase was a period of the rise of European civilization. At that time, 22
economists emerged while at the same time there were only a few Muslim scholars, namely
the Shah of Islam waliAllah with his work Hujjah Allah Al-Balighah which explains how the
provisions of sharia in relation to the behavior of an individual and the arrangement of social
organizations, other scholars are Muhammad Iqbal and Jamaluddin Al- Afghani.
We are familiar with the famous European economists such as JS Mill, Alfred Marshal
who formed the classical capitalist school. Behind them came the names of Karl Marx, Lenin
who gave birth to the socialist school. Then came JM Keynes with his Neo Classical school.
In this phase, economic thought from the West really dominated the world until now.
Meanwhile, Muslim scholars continue to experience moral and intellectual decline so that
most Islamic countries become colonies of western countries.
The fourth phase was characterized by the emergence of a new consciousness among
Muslims. A moral and intellectual awakening among Muslims gave birth to several names
such as Sayyid Qutb, Al- Maududi and Yusuf Qardhawi. However, his thoughts are more
inclined to the approach of fiqh, including the work of scientist Abu al- A'la al-Maududi from
Pakistan. It was not until a decade later that scientific works on Islamic economics began to
appear, especially after the first world conference of Muslims in Mecca in 1976 with the main
theme of Islamic economics (Qardhawi, 1997: 20-21).
Like a sleeping person, the study of Islamic economics as a science at the end of the
1970s was like stumbling awake, and this awakening seems to be related to the trends that
occurred in the world due to the economic crisis of 1974, with the birth of what is called the
flow or monetarist thinking, which further consensus Keynesian began to be abandoned
because it was considered no longer able to overcome the problems of contemporary
economics, this tendency is getting stronger after the collapse of Russia's socialist-communist
economy.
From 1980 until now, the awareness of Muslim thought developed quite rapidly, marked
by the emergence of three schools of Muslim thought, namely the Baqir As-Sadr school
(iqtishoduna), the mainstream school and the alternative school. In this phase, several
prominent names emerged such as MA. Mannan, Annas Zarka, Khurshid Ahmad, Nejatullah
Siddiqi, Hasanus Zaman, etc.
From research conducted by Umer Chapra, for example, it can be seen that the capitalist
economic system that relies on market mechanisms has failed to realize its goals, both
positive goals and normative goals.3 Similar failures achieving 'efficient and fair' economic
activity in the process of allocation and distribution of limited resources. While normative
goals are universal goals based on certain norms from all socio-economic aspects such as fair
income distribution, optimal growth rates etc. that are structured based on religious norms
also experienced by the socialist economic system. Actually, the purpose of the socialist
economic system is to correct various problems found in the capitalist economic system, so
that one of the goals of this socialist economic system is the creation of shared prosperity,
where with the implementation of the system there will no longer be various social classes in
society, economic equality occurs, and society will be free from all kinds of tyranny. This
goal turned out to be a failure, because the designers of the system did not understand what
human beings really meant. In this system, people were treated as cogs in a machine called
the state rather than a system built on the spontaneous and voluntary interactions of individual
economic actors.
Therefore, the development of Islamic economics as an alternative system is very
necessary, and with this alternative economic system the goal of economic activity to achieve
maqosidus shar'iah, which is an effort to improve the quality of economic activity to improve
the welfare of all human beings can be realized. The religious moral element is thus part of
the Islamic economic theory itself, and the Islamic economic mechanism to achieve prosperity
efficiently is built through the values of justice, equity and the development of the fiscal
sector in encouraging economic dynamics.
Conclusion
The above quote shows that Islamic economic thought in classical times was very
advanced and developed before Western scientists discussed it in the 18th-19th centuries. This
fact must be considered by contemporary economists, not only Muslim economists but also
non-Muslim economists around the world. Contribution of Islamic Economics to Modern
Economics In the past three decades, the study and research of Islamic economics has
flourished again. Various international forums on Islamic economics have been held
frequently and widely in various countries, such as conferences seminars, symposiums and
workshops. Dozens of doctors and professors of Islamic economics who are experts in both
conventional and shari'ah economics, appear as speakers in these forums. From their study,
they found that Islamic economic theory is actually not a new science or a science that is
fundamentally derived from modern economic theory that is developing today. Historical
facts show that classical Islamic scientists are the inventors and founders of all scientific
fields, including economics.
Circumstances in each period
There were several circumstances that resulted in the period of khulafa' al- rashidun not
many economists were born, including (1) Al Quran and al Hadith become the main source in
running people's lives. (2) The dominance of policy is more influenced by the attitude of the
leader as a representation of the successor to the Prophet Muhammad. This makes the caliph's
decision a reference in carrying out activities in the social field. (3) The scientific capacity of
each caliph is not the same, the period of leadership of the caliph is relatively different and the
end of his power 3 caliphs ended in political tragedy;. Abu Bakar's caliphate lasted for 2
years, 3 months, 11 days. Umar bin Khattab held the caliphate for 10 years, 6 months, 5 days.
Usman bin Affan ruled for 12 years less 12 days, and Ali bin Abi Talib ruled for 5 years and 3
months (Ahmad, 2000:12). (4) There has not been much friction thought with the Byzantine
(Greek) and Sasanian (Persian) scientific mainstream, because the mastery of Greece and
Persia has not yet reached the process of assimilating scientific potential (see Hodgson, 1999:
287).
While there were not many Muslim thinkers in the field of economics during the
Ummayah dynasty due to, among others; (1) The leader's busyness in expanding new
territories which was quite labor and time consuming. (2) The government system tended to
be Arab-centric, the Arab style was very dominant in the bureaucratic system during the
Ummayah dynasty. Non-Arabs - consisting of Persian descendants - commonly called mawali
were treated as second-class citizens. This situation affected the dialectic between the
bureaucracy and the Persians, in fact, as the more educated people were not so good. (3)
Geographically, Damascus, the capital of the Ummayah dynasty consisted mostly of Arabs, so
it was far from the interaction of the outside world, in contrast to Bagdad, the capital of the
Abbasid dynasty, which was close to Cteshipon, the former capital of the Sassanid empire,
Persia. (see Saefudin, 2002: 30-31)
While progress Islamic thought at period dynasty Abbasid dynasty was caused by; (1)
The contact between Islam and Persia became the development of science and philosophy
because Persia culturally played a major role in the development of the Greek scientific
tradition. (2) There was a great deal of activity in translating Greek literature into Arabic.
According to Mehdi Nakosteen, the translation movement was influenced by the previous
translation movement carried out during the Sassanid Empire, which was centered at the
Jundishapur Academy. This academy was the center for translating Greek and Hindu works of
science and philosophy into Pahlavi. From this school also came some important translations
from Sanskrit, Pahlavi and Syriac into Arabic. (Nakosteen, 1964:33) (3) The relative absence
of territorial clearances and rebellions ensured the stability of the government so that the
government's concentration on promoting intellectual aspects found opportunities. (4) The
existence of heterogeneous civilizations and cultures in Baghdad led to a process of
interaction between one culture and another; Arab, Greek, Persian, and Hindu which had an
impact on intellectual development. Bagdad was also inhabited by the rest of the population
native Chaldaeans and Suryani. (5) Bagdad was considered strategic and profitable because it
was passed by the Tigris and Euphrates rivers. (Saefuddin, 2002: 149) Goods can go in and
out through the river using boats so that Bagdad becomes a bustling economic satellite with
commodities being traded.
Then, the science of economics during the Ummayah or Abbasid era is certainly not as
familiar today. From the above historical developments we can note that (1) Economics is an
integral part of the political, social and cultural life of Islamic society so that economic
thought in the work of Muslim thinkers is difficult to separate from political and cultural
thought. This can be proven by the number of books written by Muslim thinkers who unite
economic problems with social, political and cultural problems. (2) Muslim thinkers are
known as Muslim economists because they have documented works through written works
that can be accessed by generations after him, and or known because there are students of the
Muslim thinker who documented his economic his economic thought. (3) Every Muslim
thinker expresses economic or social, political and cultural issues influenced by the
background of each Muslim thinker's life; residence, country, occupation and others.
The development of Muslim economic thought in Europe
The development of knowledge in the Islamic world influenced the progress of thought
in the European world. The influence to Europe is through several ways as follows:
Travels.
During the 11th and early centuries 12 Several Latin-Scholastic European scholars traveled in
several Arab countries to learn Arabic in order to gain knowledge to bring back to Europe.
During this period many students from Italy, Spain and Southern France attended Muslim
studies to learn mathematics, philosophy, medicine, cosmography, and mathematics other
studies in order to be able to teach in Western universities-which were established after the
studies in the Muslim world (Sharif, 1966:1367).
Translation.
From the 11th to the 14th century, there was a great deal of translation from Arabic to
Latin, not only of Arabic writing, but from Arabic to Hebrew. This was done in Spain, Italy
and France. Some notable translators are known from medieval history such as Adelard of
Bath, Constantine the African, Michael the Sct, Herman the German, Dominic Gundisilavi,
John of Seville, Plato of Trivoli, William of Luna, Gerard of Cremona, and Aflred of Sareshel
(Durant, 1950:910) According to Crombie during the Middle Ages, the translation of Arabic
into Latin was a major undertaking 14th and 15th centuries, Scholastic Europe was also not
directly influenced by the legacy of European thinkers, they still used the knowledge of
Muslim thinkers (see Crombie, 1963: 30).
Oral Tradition
Other important influential sources in the oral tradition are insufficiently available.
According to Chejne that specifically for Oral tradition is an important factor, and this is
evidenced by the literary relationship between the Arabs and the West. According to Chejne,
oral transmission took place over a long period of time and relations were maintained between
Muslims and Christians by being bilingual in Spanish. (see Chejne, 1980:111)
Trade
Some authors point out that trade brought the Arab world through Russian roads to
Polania, the Baltic, Scadinavia, central-western Europe and Iceland. Through trade resulting
in the spread of economic institutions, Arab money was used in the Christian Kingdom of the
North, where there had been no coins for 400 years. (see Hitti, 1943:144)
Diffusion and Institutions
Udovich reports that by the 15th century, there were already various contracts of trust
and partnership between Venetians and Arab merchants in Alexandria. These contractual
forms originated in the Islamic world and eventually spread in Latin Europe through contact
with Muslim scholars and scholars legal experts. Then, the emergence of various forms of
instruments and institutions facilitating the development of commerce and trade in Europe,
such as bills of exchange (siftajah), letters of credit (hawala), specialized trading centers
(funduq) and private banks (ma'una) (see Kramers, 1934:102).
Crusades
The crusades that took place from 1092 to 1292 were a long time for Europe to use to
gain knowledge from the Islamic world. According to Ferruollo, during this period the
Muslim community helped shape European attitudes, feelings and values (see Ferruollo,
1984: 42).
Why Europeans do not recognize that Islamic science is big enough to influence the
development of science in Europe, because (1) Europe in medieval times was known to be
very hostile to the Islamic world. This made it difficult for Europeans to accept the
advantages that had been obtained by the Muslim community (Ghanzanfar, 2002:153); and
(2) Scholars at that time borrowing without telling was a common practice, besides property
rights in the 12th century were not yet recognized. In this regard, the Spanish-era priest of the
Domician order, Raymund Martin - who influenced St. Thomas Aquinas - is known to have
sourced his book Pugio Fidei from al Ghazali's Tahafut al-Falasifa, Maqasid ul-Falasifa, al-
Munqid, Mishkat ul-Anwar, and Ihya Ulumuddin, without citing the references (see Sharif,
1966: 1361)).
If traced further, let alone listen back to how the development of Muslim thought about
Islamic economics that already exists (the author described above) which can be traced since
the life of the Prophet Muhammad SAW. Adam Smith was named the father of modern
economics along with the launch of economic thought in a book entitled 'An Inquiry into the
nature causes the wealth of nations'. From Smith's thought, a tradition of scientific thought
was born Classical economics emphasizes the freedom of market mechanisms in measuring
economic activity (laises faire) without being disturbed by government policies.
Adam Smith gave an example of an economically backward society is the Indians in
North America. While an example of an advanced economic society is the Arabs. The Arabs
Adam Smith meant were certainly a nation of traders in the days of the Prophet. Because in
the next explanation he said that the nation led by Muhammad and the generations after him.
From Adam Smith's explanation, it is clear that he recognized the superiority and
greatness of the Muslim economy in the past. Therefore, it is likely that he has indirectly
adopted Islamic economic theories. The indication shows that the progress of the Islamic
economy in medieval times was felt in England, Adam Smith's homeland, even long before he
was born. In 774 AD, King Offa in England at that time minted gold coins which were a
direct copy of the Islamic dinar, including its Arabic writing. All The writing on the coin is
Arabic, except on one side it says OFFAREX.
This reality shows that the Islamic dinar was then the strongest currency in the world. In
addition, the Muslim economy was far more advanced than Europe. It showed that Muslim
international trade had reached as far as Northern Europe. In 1764, Adam Smith gave up his
professorship in Glasgow England and chose his new career as economic advisor to the Duke
of Buccleuch. It was during this period that Smith traveled extensively abroad, especially to
France. Here he met many famous philosophers. Smith began writing The Wealth of Nations
while he was in France and completed it in 1766, in Kirdcaldy. And ten years later it was
published, namely in 1776. At that time in Europe there were already translated books by
Muslim economists. In fact, in the South of France, many professors were applying the
teaching patterns they had learned from Muslim countries. The explanation above shows that
the role of Muslim scientists is very significant to the rise of European intellectualism,
including in economic thought.
In the next development of classical economic thought was not always able to solve all
the economic problems that are growing increasingly complex, one proof is the emergence of
a severe depression of the world economy ahead of World War II (malaise period). From here
then inspired the birth of economic thought that emphasizes the need for the role of
government in regulating economic activity. This thinking was pioneered by John Maynard
Keynes who is considered a modern economic figure who developed the idea of short-term
economic analysis to encourage economic growth and overcome the problems of
unemployment and inflation.
Contemporary Islamic economic thought can be categorized into three groups of schools
of thought, namely:
Baqir As-Sadr's School
Mainstream Mazhab
Alternative Mazhab
Baqir As-Sadr's School
Scholars who became pioneers of this school are Baqir as- Sadr and Ali Shariati and
scholars from Iran and Iraq. According to As-Sadr's thinking that in studying economics must
be seen from two aspects, namely aspects of philosophy of economics or normative economics
and aspects of positive economics. An example of positive economics, i.e. studying the theory
of consumption and demand which is a common and acceptable phenomenon by anyone
without being influenced by idiology. Meanwhile, from the aspect of phylosophy of
economics which is the result of human thought, it will be found that each human group has
an idiology, a perspective that is not the same. An example is the discussion of 'justice'.
According to the concept of classical capitalism, what is meant by fairness is that you get
what you deserve, meaning 'you get what you have worked for'. Meanwhile, according to
classical socialism, the meaning of 'fair' is that no one has previlege to get more than others,
meaning that no one gets facilities to get more than others, in other words, everyone gets the
same. But Islam has its own meaning in interpreting 'fair' which is laa tadhlimuuna wa laa
tudhlamuuna meaning not to harm each other. So according to Baqir As-sadr's school of
thought, there is a difference in principle between economics and Islamic ideology, Therefore,
there will never be a common ground between Islam and economics.
Economics states that economic problems arise because of the problem of scarcity of
economic resources (scarcity) compared to human needs which are unlimited. In this case, the
school of Baqir As-Sadr rejects the understanding of economic science because in Islam it has
been confirmed that Allah Swt. has created creatures in this world including humans in the
sufficiency of economic resources as stated in His word:1
َ
َقَلَخَ
وََ
لُكَََ
فٍَءْيَش-َ
ُهَر دَقَََت-َْ
يِدْق-اًر
"...........................................................
.......... And He has created all things, and He has measured them out with precision."
Furthermore, according to the school of Baqir As-Sadr, the main problem faced by all
human beings in this world is the problem of unequal distribution of wealth. How the gift
given by Allah SWT to all creatures including humans can be distributed evenly and
proportionally. According to the school of Baqir As-Sadr to realize this, there are several
steps taken, namely:
replacing the term economics with the term iqtishad which implies that it is harmonious,
equal, and balanced (in between).
compile and reconstruct a separate economic science derived from the Qur'an and
Assunnah.
This is the contribution of Baqir As-sadr's school which is quite significant in the
discourse of the development of Islamic economics.
Mainstream Mazhab
Islamic economic thought from the mainstream school of thought is what gives the most
color in the discourse of Islamic economics now because most of its figures from the Islamic
Development Bank (IDB) which has funding facilities and cooperation networks with various
international institutions. The figures of the mainstream school include M. Umer Chapra, M.
A. Mannan, Nejatullah Siddiqi, Khurshid Ahmad, Monzer Kahf etc. equilibrium. But
relatively at a certain time and in a certain place there will still be a problem of scarcity. So
until here there is no difference between conventional economics and Islamic economics. The
difference is only in the mechanism of solving economic problems that according to the
mainstream school must refer to the Qur'an and Assunnah. While in the view of classical
capitalism the solution through the operation of the market mechanism, and classical
socialism through a centralized planning system.
Alternative Mazhab
In contrast to the views of the two previous schools, the alternative school sees that
Baqir as-Sadr's school of thought tries to explore and find a new Islamic economic paradigm
by leaving the conventional economic paradigm. While the mainstream school is considered
to be another face of the neoclassical view by eliminating the element of interest and adding
zakat.
The alternative school led by Prof. Timjur Kura (Chair of the Economics Department at
the University of Southern California), Prof. Jomo and Prof. Muhammad Arief contributes
through critical analysis of economics not only on the views of capitalism and socialism but
also criticizes the development of economic discourse. Islamic economic discourse. They
Islam is a view or ideology that is absolute truth that talks about Islamic economics means
studying human thinking about the verses of God and the sunnah of the Prophet in the
economic aspect. So according to this alternative school of Islamic economics is a
discourse that can still be debated because it is a human interpretation of the Qur'an
and Assunnah that needs to be tested and studied continuously.
Actually there is still one more Islamic economic discourse that is also beginning to
develop in the Islamic world, namely the thought of implementing a gold currency system as
a substitute for paper currency. (which was driven by Dr. Umar Vadillo and the Hisbut Tahrir
activist group) as happened / used during the Abbasid reign, namely the dinar and dirham
(gold and silver) currencies.
However, their thoughts cannot be included in a separate school of thought because they
are relative It is still premature and has not been supported by theoretical foundations and
empirical tests in the context of modern life. Moreover, in economic practice in the field it is
over valued so that instead a currency made of copper called "fulus" was created. Ibn
Taymiyah said: "There is no problem with money not coming from gold and silver as long as
the government is able to maintain its value". Al-Maghribi stated: "If the government prints
money continuously, it means that the government does not maintain the value of the
currency". In another section Ibn Qayyim warned: "If the government continuously prints
money, it can cause usury khafi (hidden usury) in the community, namely usury framed by
buying and selling transactions". This is in accordance with the meaning of the Hadith of the
Prophet, namely "There will come a time when people legalize usury by means of buying
and selling".
Muhammad Nejatullah Siddiqi in his book "Reading in Islamic Economic Thought"
explains the history of Islamic economic thought in four phases, namely:
Phase I: 113 H-451 H/731 M- 1058 M.
Phase II: 450 H-850 H / 1058 M-1446 M.
Phase III: 850 H-1350 H / 1446 M-1932 M.
Phase IV: 1932 AD-present.
In the first phase, it is known that there were 15 Muslim economists who actually
contributed to the development of economic thought, while at the same time there were no
economists from mainland Europe. Known at that time figures such as Abu Yusuf,
Muhammad bin Hasan al-Ahaibani, Harist bin Asan al-Muhadibi, Zaid bin Ali Zainal Abidin
bin Hussein bin Ali bin Abi Talib, Junaid Baghdadi, Ibn Miskawaih, Mawardi, etc.
The discourse that developed at that time was macroeconomic thinking concerning
fiscal policy and state finances as reported in Abu Yusuf's book of Al- Kharaj, which is a
book that is written by Abu Yusuf explains the mechanism for imposing taxes on land. Then
also Abu Ubaid in the book Al-Amwal describes how the management of state finances and
the state budget. In the book Al-Ahkam Al-Sulthaniyah by Mawardi discusses more about the
problem of government administration. And by other Islamic economic thinkers have also
been touched on the operation of unfair market mechanisms.
In the second phase of the development of Islamic economic thought, the discourse on
economics intensively began to develop even though on the other hand it was characterized
by changes in the structure of Islamic power which was getting wider. Several major figures
came to the fore such as Imam Al-Ghozali, Ibn Taymiyah, Ibn Khaldun, Ibn Qayyim. In this
second phase, the scientific discourse was directed more towards microeconomic analysis and
the function of money.
Imam Al-Ghozali addressed the issue of money and its functions. According to Imam
Al-Ghazali, it is not a problem to apply a non-gold and silver currency as long as the
government is able to maintain the stability of the currency as a legal tender. In one of his
writings he said "Money is like a mirror, colorless but can reflect all colors" and he also said
"If money has been traded, then it is the same as imprisoning the function of money", so that if
that happens it will cause depreciation of the currency exchange rate against other currencies.
He also explained about the prohibition of usury fadhl and its impact on the economy. Al-
Ghozali's intensive economic studies also touched on the issue of scales, price control (market
intervention), determination of taxes in an emergency, etc. In some parts of his thought also
touches on how the market mechanism works through the power of demand and supply.
(supply) in determining the market equilibrium.
An example of how to overcome the impact of price increases in order to stabilize
market prices is reflected in the government of Umar bin Khatab when there was inflation
caused by crop failure in the Hijaz area as the center of wheat production. The policy applied
by the government at that time to overcome it was through the market mechanism by
increasing the supply of wheat imported from Fuztadz Egypt so that prices returned to normal.
Conversely, if inflation is caused by market distortions such as monopolistic practices
and market hoarding, then the solution applied is not not by using the market mechanism but
through government intervention. Ibn Taymiyah has long suggested that the government
needs to conduct price intervention at the original equilibrium price to break the behavior of
monopolists and hoarding of goods. In contrast to government intervention, the views of
conventional economists suggest that Price fixing is done at the ceiling price or at the floor
price. Then what about the Prophet's hadith regarding the issue of price increases in Medina at
that time, namely "Allah is the one who determines prices. It is Allah who determines
provision and it is Allah who withholds provision". Apparently it was this hadith that later
inspired some economists to conceptualize the operation of the market mechanism by the
invisible hand. If so, is the proposition put forward by Ibn Taymiyyah regarding price
intervention contrary to the intent of the Prophet's hadith above? The answer is no! because
the direction and purpose of government intervention is so that the equilibrium price in the
market returns to the initial equilibrium position (equilibrium).
The third phase was a period of the rise of European civilization. At that time, 22
economists emerged while at the same time there were only a few Muslim scholars, namely
the Shah of Islam waliAllah with his work Hujjah Allah Al-Balighah which explains how the
provisions of sharia in relation to the behavior of an individual and the arrangement of social
organizations, other scholars are Muhammad Iqbal and Jamaluddin Al- Afghani.
We are familiar with the famous European economists such as JS Mill, Alfred Marshal
who formed the classical capitalist school. Behind them came the names of Karl Marx, Lenin
who gave birth to the socialist school. Then came JM Keynes with his Neo Classical school.
In this phase, economic thought from the West really dominated the world until now.
Meanwhile, Muslim scholars continue to experience moral and intellectual decline so that
most Islamic countries become colonies of western countries.
The fourth phase was characterized by the emergence of a new consciousness among
Muslims. A moral and intellectual awakening among Muslims gave birth to several names
such as Sayyid Qutb, Al- Maududi and Yusuf Qardhawi. However, his thoughts are more
inclined to the approach of fiqh, including the work of scientist Abu al- A'la al-Maududi from
Pakistan. It was not until a decade later that scientific works on Islamic economics began to
appear, especially after the first world conference of Muslims in Mecca in 1976 with the main
theme of Islamic economics (Qardhawi, 1997: 20-21).
Like a sleeping person, the study of Islamic economics as a science at the end of the
1970s was like stumbling awake, and this awakening seems to be related to the trends that
occurred in the world due to the economic crisis of 1974, with the birth of what is called the
flow or monetarist thinking, which further consensus Keynesian began to be abandoned
because it was considered no longer able to overcome the problems of contemporary
economics, this tendency is getting stronger after the collapse of Russia's socialist-communist
economy.
From 1980 until now, the awareness of Muslim thought developed quite rapidly, marked
by the emergence of three schools of Muslim thought, namely the Baqir As-Sadr school
(iqtishoduna), the mainstream school and the alternative school. In this phase, several
prominent names emerged such as MA. Mannan, Annas Zarka, Khurshid Ahmad, Nejatullah
Siddiqi, Hasanus Zaman, etc.
From research conducted by Umer Chapra, for example, it can be seen that the capitalist
economic system that relies on market mechanisms has failed to realize its goals, both
positive goals and normative goals.3 Similar failures achieving 'efficient and fair' economic
activity in the process of allocation and distribution of limited resources. While normative
goals are universal goals based on certain norms from all socio-economic aspects such as fair
income distribution, optimal growth rates etc. that are structured based on religious norms
also experienced by the socialist economic system. Actually, the purpose of the socialist
economic system is to correct various problems found in the capitalist economic system, so
that one of the goals of this socialist economic system is the creation of shared prosperity,
where with the implementation of the system there will no longer be various social classes in
society, economic equality occurs, and society will be free from all kinds of tyranny. This
goal turned out to be a failure, because the designers of the system did not understand what
human beings really meant. In this system, people were treated as cogs in a machine called
the state rather than a system built on the spontaneous and voluntary interactions of individual
economic actors.
Therefore, the development of Islamic economics as an alternative system is very
necessary, and with this alternative economic system the goal of economic activity to achieve
maqosidus shar'iah, which is an effort to improve the quality of economic activity to improve
the welfare of all human beings can be realized. The religious moral element is thus part of
the Islamic economic theory itself, and the Islamic economic mechanism to achieve prosperity
efficiently is built through the values of justice, equity and the development of the fiscal
sector in encouraging economic dynamics.
Conclusion
The above quote shows that Islamic economic thought in classical times was very
advanced and developed before Western scientists discussed it in the 18th-19th centuries. This
fact must be considered by contemporary economists, not only Muslim economists but also
non-Muslim economists around the world. Contribution of Islamic Economics to Modern
Economics In the past three decades, the study and research of Islamic economics has
flourished again. Various international forums on Islamic economics have been held
frequently and widely in various countries, such as conferences seminars, symposiums and
workshops. Dozens of doctors and professors of Islamic economics who are experts in both
conventional and shari'ah economics, appear as speakers in these forums. From their study,
they found that Islamic economic theory is actually not a new science or a science that is
fundamentally derived from modern economic theory that is developing today. Historical
facts show that classical Islamic scientists are the inventors and founders of all scientific
fields, including economics.
Circumstances in each period
There were several circumstances that resulted in the period of khulafa' al- rashidun not
many economists were born, including (1) Al Quran and al Hadith become the main source in
running people's lives. (2) The dominance of policy is more influenced by the attitude of the
leader as a representation of the successor to the Prophet Muhammad. This makes the caliph's
decision a reference in carrying out activities in the social field. (3) The scientific capacity of
each caliph is not the same, the period of leadership of the caliph is relatively different and the
end of his power 3 caliphs ended in political tragedy;. Abu Bakar's caliphate lasted for 2
years, 3 months, 11 days. Umar bin Khattab held the caliphate for 10 years, 6 months, 5 days.
Usman bin Affan ruled for 12 years less 12 days, and Ali bin Abi Talib ruled for 5 years and 3
months (Ahmad, 2000:12). (4) There has not been much friction thought with the Byzantine
(Greek) and Sasanian (Persian) scientific mainstream, because the mastery of Greece and
Persia has not yet reached the process of assimilating scientific potential (see Hodgson, 1999:
287).
While there were not many Muslim thinkers in the field of economics during the
Ummayah dynasty due to, among others; (1) The leader's busyness in expanding new
territories which was quite labor and time consuming. (2) The government system tended to
be Arab-centric, the Arab style was very dominant in the bureaucratic system during the
Ummayah dynasty. Non-Arabs - consisting of Persian descendants - commonly called mawali
were treated as second-class citizens. This situation affected the dialectic between the
bureaucracy and the Persians, in fact, as the more educated people were not so good. (3)
Geographically, Damascus, the capital of the Ummayah dynasty consisted mostly of Arabs, so
it was far from the interaction of the outside world, in contrast to Bagdad, the capital of the
Abbasid dynasty, which was close to Cteshipon, the former capital of the Sassanid empire,
Persia. (see Saefudin, 2002: 30-31)
While progress Islamic thought at period dynasty Abbasid dynasty was caused by; (1)
The contact between Islam and Persia became the development of science and philosophy
because Persia culturally played a major role in the development of the Greek scientific
tradition. (2) There was a great deal of activity in translating Greek literature into Arabic.
According to Mehdi Nakosteen, the translation movement was influenced by the previous
translation movement carried out during the Sassanid Empire, which was centered at the
Jundishapur Academy. This academy was the center for translating Greek and Hindu works of
science and philosophy into Pahlavi. From this school also came some important translations
from Sanskrit, Pahlavi and Syriac into Arabic. (Nakosteen, 1964:33) (3) The relative absence
of territorial clearances and rebellions ensured the stability of the government so that the
government's concentration on promoting intellectual aspects found opportunities. (4) The
existence of heterogeneous civilizations and cultures in Baghdad led to a process of
interaction between one culture and another; Arab, Greek, Persian, and Hindu which had an
impact on intellectual development. Bagdad was also inhabited by the rest of the population
native Chaldaeans and Suryani. (5) Bagdad was considered strategic and profitable because it
was passed by the Tigris and Euphrates rivers. (Saefuddin, 2002: 149) Goods can go in and
out through the river using boats so that Bagdad becomes a bustling economic satellite with
commodities being traded.
Then, the science of economics during the Ummayah or Abbasid era is certainly not as
familiar today. From the above historical developments we can note that (1) Economics is an
integral part of the political, social and cultural life of Islamic society so that economic
thought in the work of Muslim thinkers is difficult to separate from political and cultural
thought. This can be proven by the number of books written by Muslim thinkers who unite
economic problems with social, political and cultural problems. (2) Muslim thinkers are
known as Muslim economists because they have documented works through written works
that can be accessed by generations after him, and or known because there are students of the
Muslim thinker who documented his economic his economic thought. (3) Every Muslim
thinker expresses economic or social, political and cultural issues influenced by the
background of each Muslim thinker's life; residence, country, occupation and others.
The development of Muslim economic thought in Europe
The development of knowledge in the Islamic world influenced the progress of thought
in the European world. The influence to Europe is through several ways as follows:
Travels.
During the 11th and early centuries 12 Several Latin-Scholastic European scholars traveled in
several Arab countries to learn Arabic in order to gain knowledge to bring back to Europe.
During this period many students from Italy, Spain and Southern France attended Muslim
studies to learn mathematics, philosophy, medicine, cosmography, and mathematics other
studies in order to be able to teach in Western universities-which were established after the
studies in the Muslim world (Sharif, 1966:1367).
Translation.
From the 11th to the 14th century, there was a great deal of translation from Arabic to
Latin, not only of Arabic writing, but from Arabic to Hebrew. This was done in Spain, Italy
and France. Some notable translators are known from medieval history such as Adelard of
Bath, Constantine the African, Michael the Sct, Herman the German, Dominic Gundisilavi,
John of Seville, Plato of Trivoli, William of Luna, Gerard of Cremona, and Aflred of Sareshel
(Durant, 1950:910) According to Crombie during the Middle Ages, the translation of Arabic
into Latin was a major undertaking 14th and 15th centuries, Scholastic Europe was also not
directly influenced by the legacy of European thinkers, they still used the knowledge of
Muslim thinkers (see Crombie, 1963: 30).
Oral Tradition
Other important influential sources in the oral tradition are insufficiently available.
According to Chejne that specifically for Oral tradition is an important factor, and this is
evidenced by the literary relationship between the Arabs and the West. According to Chejne,
oral transmission took place over a long period of time and relations were maintained between
Muslims and Christians by being bilingual in Spanish. (see Chejne, 1980:111)
Trade
Some authors point out that trade brought the Arab world through Russian roads to
Polania, the Baltic, Scadinavia, central-western Europe and Iceland. Through trade resulting
in the spread of economic institutions, Arab money was used in the Christian Kingdom of the
North, where there had been no coins for 400 years. (see Hitti, 1943:144)
Diffusion and Institutions
Udovich reports that by the 15th century, there were already various contracts of trust
and partnership between Venetians and Arab merchants in Alexandria. These contractual
forms originated in the Islamic world and eventually spread in Latin Europe through contact
with Muslim scholars and scholars legal experts. Then, the emergence of various forms of
instruments and institutions facilitating the development of commerce and trade in Europe,
such as bills of exchange (siftajah), letters of credit (hawala), specialized trading centers
(funduq) and private banks (ma'una) (see Kramers, 1934:102).
Crusades
The crusades that took place from 1092 to 1292 were a long time for Europe to use to
gain knowledge from the Islamic world. According to Ferruollo, during this period the
Muslim community helped shape European attitudes, feelings and values (see Ferruollo,
1984: 42).
Why Europeans do not recognize that Islamic science is big enough to influence the
development of science in Europe, because (1) Europe in medieval times was known to be
very hostile to the Islamic world. This made it difficult for Europeans to accept the
advantages that had been obtained by the Muslim community (Ghanzanfar, 2002:153); and
(2) Scholars at that time borrowing without telling was a common practice, besides property
rights in the 12th century were not yet recognized. In this regard, the Spanish-era priest of the
Domician order, Raymund Martin - who influenced St. Thomas Aquinas - is known to have
sourced his book Pugio Fidei from al Ghazali's Tahafut al-Falasifa, Maqasid ul-Falasifa, al-
Munqid, Mishkat ul-Anwar, and Ihya Ulumuddin, without citing the references (see Sharif,
1966: 1361)).
If traced further, let alone listen back to how the development of Muslim thought about
Islamic economics that already exists (the author described above) which can be traced since
the life of the Prophet Muhammad SAW. Adam Smith was named the father of modern
economics along with the launch of economic thought in a book entitled 'An Inquiry into the
nature causes the wealth of nations'. From Smith's thought, a tradition of scientific thought
was born Classical economics emphasizes the freedom of market mechanisms in measuring
economic activity (laises faire) without being disturbed by government policies.
Adam Smith gave an example of an economically backward society is the Indians in
North America. While an example of an advanced economic society is the Arabs. The Arabs
Adam Smith meant were certainly a nation of traders in the days of the Prophet. Because in
the next explanation he said that the nation led by Muhammad and the generations after him.
From Adam Smith's explanation, it is clear that he recognized the superiority and
greatness of the Muslim economy in the past. Therefore, it is likely that he has indirectly
adopted Islamic economic theories. The indication shows that the progress of the Islamic
economy in medieval times was felt in England, Adam Smith's homeland, even long before he
was born. In 774 AD, King Offa in England at that time minted gold coins which were a
direct copy of the Islamic dinar, including its Arabic writing. All The writing on the coin is
Arabic, except on one side it says OFFAREX.
This reality shows that the Islamic dinar was then the strongest currency in the world. In
addition, the Muslim economy was far more advanced than Europe. It showed that Muslim
international trade had reached as far as Northern Europe. In 1764, Adam Smith gave up his
professorship in Glasgow England and chose his new career as economic advisor to the Duke
of Buccleuch. It was during this period that Smith traveled extensively abroad, especially to
France. Here he met many famous philosophers. Smith began writing The Wealth of Nations
while he was in France and completed it in 1766, in Kirdcaldy. And ten years later it was
published, namely in 1776. At that time in Europe there were already translated books by
Muslim economists. In fact, in the South of France, many professors were applying the
teaching patterns they had learned from Muslim countries. The explanation above shows that
the role of Muslim scientists is very significant to the rise of European intellectualism,
including in economic thought.
In the next development of classical economic thought was not always able to solve all
the economic problems that are growing increasingly complex, one proof is the emergence of
a severe depression of the world economy ahead of World War II (malaise period). From here
then inspired the birth of economic thought that emphasizes the need for the role of
government in regulating economic activity. This thinking was pioneered by John Maynard
Keynes who is considered a modern economic figure who developed the idea of short-term
economic analysis to encourage economic growth and overcome the problems of
unemployment and inflation.
Contemporary Islamic economic thought can be categorized into three groups of schools
of thought, namely:
Baqir As-Sadr's School
Mainstream Mazhab
Alternative Mazhab
Baqir As-Sadr's School
Scholars who became pioneers of this school are Baqir as- Sadr and Ali Shariati and
scholars from Iran and Iraq. According to As-Sadr's thinking that in studying economics must
be seen from two aspects, namely aspects of philosophy of economics or normative economics
and aspects of positive economics. An example of positive economics, i.e. studying the theory
of consumption and demand which is a common and acceptable phenomenon by anyone
without being influenced by idiology. Meanwhile, from the aspect of phylosophy of
economics which is the result of human thought, it will be found that each human group has
an idiology, a perspective that is not the same. An example is the discussion of 'justice'.
According to the concept of classical capitalism, what is meant by fairness is that you get
what you deserve, meaning 'you get what you have worked for'. Meanwhile, according to
classical socialism, the meaning of 'fair' is that no one has previlege to get more than others,
meaning that no one gets facilities to get more than others, in other words, everyone gets the
same. But Islam has its own meaning in interpreting 'fair' which is laa tadhlimuuna wa laa
tudhlamuuna meaning not to harm each other. So according to Baqir As-sadr's school of
thought, there is a difference in principle between economics and Islamic ideology, Therefore,
there will never be a common ground between Islam and economics.
Economics states that economic problems arise because of the problem of scarcity of
economic resources (scarcity) compared to human needs which are unlimited. In this case, the
school of Baqir As-Sadr rejects the understanding of economic science because in Islam it has
been confirmed that Allah Swt. has created creatures in this world including humans in the
sufficiency of economic resources as stated in His word:1
َ
َقَلَخَ
وََ
لُكَََ
فٍَءْيَش-َ
ُهَر دَقَََت-َْ
يِدْق-اًر
"...........................................................
.......... And He has created all things, and He has measured them out with precision."
Furthermore, according to the school of Baqir As-Sadr, the main problem faced by all
human beings in this world is the problem of unequal distribution of wealth. How the gift
given by Allah SWT to all creatures including humans can be distributed evenly and
proportionally. According to the school of Baqir As-Sadr to realize this, there are several
steps taken, namely:
replacing the term economics with the term iqtishad which implies that it is harmonious,
equal, and balanced (in between).
compile and reconstruct a separate economic science derived from the Qur'an and
Assunnah.
This is the contribution of Baqir As-sadr's school which is quite significant in the
discourse of the development of Islamic economics.
Mainstream Mazhab
Islamic economic thought from the mainstream school of thought is what gives the most
color in the discourse of Islamic economics now because most of its figures from the Islamic
Development Bank (IDB) which has funding facilities and cooperation networks with various
international institutions. The figures of the mainstream school include M. Umer Chapra, M.
A. Mannan, Nejatullah Siddiqi, Khurshid Ahmad, Monzer Kahf etc. equilibrium. But
relatively at a certain time and in a certain place there will still be a problem of scarcity. So
until here there is no difference between conventional economics and Islamic economics. The
difference is only in the mechanism of solving economic problems that according to the
mainstream school must refer to the Qur'an and Assunnah. While in the view of classical
capitalism the solution through the operation of the market mechanism, and classical
socialism through a centralized planning system.
Alternative Mazhab
In contrast to the views of the two previous schools, the alternative school sees that
Baqir as-Sadr's school of thought tries to explore and find a new Islamic economic paradigm
by leaving the conventional economic paradigm. While the mainstream school is considered
to be another face of the neoclassical view by eliminating the element of interest and adding
zakat.
The alternative school led by Prof. Timjur Kura (Chair of the Economics Department at
the University of Southern California), Prof. Jomo and Prof. Muhammad Arief contributes
through critical analysis of economics not only on the views of capitalism and socialism but
also criticizes the development of economic discourse. Islamic economic discourse. They
Islam is a view or ideology that is absolute truth that talks about Islamic economics means
studying human thinking about the verses of God and the sunnah of the Prophet in the
economic aspect. So according to this alternative school of Islamic economics is a
discourse that can still be debated because it is a human interpretation of the Qur'an
and Assunnah that needs to be tested and studied continuously.
Actually there is still one more Islamic economic discourse that is also beginning to
develop in the Islamic world, namely the thought of implementing a gold currency system as
a substitute for paper currency. (which was driven by Dr. Umar Vadillo and the Hisbut Tahrir
activist group) as happened / used during the Abbasid reign, namely the dinar and dirham
(gold and silver) currencies.
However, their thoughts cannot be included in a separate school of thought because they
are relative It is still premature and has not been supported by theoretical foundations and
empirical tests in the context of modern life. Moreover, in economic practice in the field it is
over valued so that instead a currency made of copper called "fulus" was created. Ibn
Taymiyah said: "There is no problem with money not coming from gold and silver as long as
the government is able to maintain its value". Al-Maghribi stated: "If the government prints
money continuously, it means that the government does not maintain the value of the
currency". In another section Ibn Qayyim warned: "If the government continuously prints
money, it can cause usury khafi (hidden usury) in the community, namely usury framed by
buying and selling transactions". This is in accordance with the meaning of the Hadith of the
Prophet, namely "There will come a time when people legalize usury by means of buying
and selling".
Muhammad Nejatullah Siddiqi in his book "Reading in Islamic Economic Thought"
explains the history of Islamic economic thought in four phases, namely:
Phase I: 113 H-451 H/731 M- 1058 M.
Phase II: 450 H-850 H / 1058 M-1446 M.
Phase III: 850 H-1350 H / 1446 M-1932 M.
Phase IV: 1932 AD-present.
In the first phase, it is known that there were 15 Muslim economists who actually
contributed to the development of economic thought, while at the same time there were no
economists from mainland Europe. Known at that time figures such as Abu Yusuf,
Muhammad bin Hasan al-Ahaibani, Harist bin Asan al-Muhadibi, Zaid bin Ali Zainal Abidin
bin Hussein bin Ali bin Abi Talib, Junaid Baghdadi, Ibn Miskawaih, Mawardi, etc.
The discourse that developed at that time was macroeconomic thinking concerning
fiscal policy and state finances as reported in Abu Yusuf's book of Al- Kharaj, which is a
book that is written by Abu Yusuf explains the mechanism for imposing taxes on land. Then
also Abu Ubaid in the book Al-Amwal describes how the management of state finances and
the state budget. In the book Al-Ahkam Al-Sulthaniyah by Mawardi discusses more about the
problem of government administration. And by other Islamic economic thinkers have also
been touched on the operation of unfair market mechanisms.
In the second phase of the development of Islamic economic thought, the discourse on
economics intensively began to develop even though on the other hand it was characterized
by changes in the structure of Islamic power which was getting wider. Several major figures
came to the fore such as Imam Al-Ghozali, Ibn Taymiyah, Ibn Khaldun, Ibn Qayyim. In this
second phase, the scientific discourse was directed more towards microeconomic analysis and
the function of money.
Imam Al-Ghozali addressed the issue of money and its functions. According to Imam
Al-Ghazali, it is not a problem to apply a non-gold and silver currency as long as the
government is able to maintain the stability of the currency as a legal tender. In one of his
writings he said "Money is like a mirror, colorless but can reflect all colors" and he also said
"If money has been traded, then it is the same as imprisoning the function of money", so that if
that happens it will cause depreciation of the currency exchange rate against other currencies.
He also explained about the prohibition of usury fadhl and its impact on the economy. Al-
Ghozali's intensive economic studies also touched on the issue of scales, price control (market
intervention), determination of taxes in an emergency, etc. In some parts of his thought also
touches on how the market mechanism works through the power of demand and supply.
(supply) in determining the market equilibrium.
An example of how to overcome the impact of price increases in order to stabilize
market prices is reflected in the government of Umar bin Khatab when there was inflation
caused by crop failure in the Hijaz area as the center of wheat production. The policy applied
by the government at that time to overcome it was through the market mechanism by
increasing the supply of wheat imported from Fuztadz Egypt so that prices returned to normal.
Conversely, if inflation is caused by market distortions such as monopolistic practices
and market hoarding, then the solution applied is not not by using the market mechanism but
through government intervention. Ibn Taymiyah has long suggested that the government
needs to conduct price intervention at the original equilibrium price to break the behavior of
monopolists and hoarding of goods. In contrast to government intervention, the views of
conventional economists suggest that Price fixing is done at the ceiling price or at the floor
price. Then what about the Prophet's hadith regarding the issue of price increases in Medina at
that time, namely "Allah is the one who determines prices. It is Allah who determines
provision and it is Allah who withholds provision". Apparently it was this hadith that later
inspired some economists to conceptualize the operation of the market mechanism by the
invisible hand. If so, is the proposition put forward by Ibn Taymiyyah regarding price
intervention contrary to the intent of the Prophet's hadith above? The answer is no! because
the direction and purpose of government intervention is so that the equilibrium price in the
market returns to the initial equilibrium position (equilibrium).
The third phase was a period of the rise of European civilization. At that time, 22
economists emerged while at the same time there were only a few Muslim scholars, namely
the Shah of Islam waliAllah with his work Hujjah Allah Al-Balighah which explains how the
provisions of sharia in relation to the behavior of an individual and the arrangement of social
organizations, other scholars are Muhammad Iqbal and Jamaluddin Al- Afghani.
We are familiar with the famous European economists such as JS Mill, Alfred Marshal
who formed the classical capitalist school. Behind them came the names of Karl Marx, Lenin
who gave birth to the socialist school. Then came JM Keynes with his Neo Classical school.
In this phase, economic thought from the West really dominated the world until now.
Meanwhile, Muslim scholars continue to experience moral and intellectual decline so that
most Islamic countries become colonies of western countries.
The fourth phase was characterized by the emergence of a new consciousness among
Muslims. A moral and intellectual awakening among Muslims gave birth to several names
such as Sayyid Qutb, Al- Maududi and Yusuf Qardhawi. However, his thoughts are more
inclined to the approach of fiqh, including the work of scientist Abu al- A'la al-Maududi from
Pakistan. It was not until a decade later that scientific works on Islamic economics began to
appear, especially after the first world conference of Muslims in Mecca in 1976 with the main
theme of Islamic economics (Qardhawi, 1997: 20-21).
Like a sleeping person, the study of Islamic economics as a science at the end of the
1970s was like stumbling awake, and this awakening seems to be related to the trends that
occurred in the world due to the economic crisis of 1974, with the birth of what is called the
flow or monetarist thinking, which further consensus Keynesian began to be abandoned
because it was considered no longer able to overcome the problems of contemporary
economics, this tendency is getting stronger after the collapse of Russia's socialist-communist
economy.
From 1980 until now, the awareness of Muslim thought developed quite rapidly, marked
by the emergence of three schools of Muslim thought, namely the Baqir As-Sadr school
(iqtishoduna), the mainstream school and the alternative school. In this phase, several
prominent names emerged such as MA. Mannan, Annas Zarka, Khurshid Ahmad, Nejatullah
Siddiqi, Hasanus Zaman, etc.
From research conducted by Umer Chapra, for example, it can be seen that the capitalist
economic system that relies on market mechanisms has failed to realize its goals, both
positive goals and normative goals.3 Similar failures achieving 'efficient and fair' economic
activity in the process of allocation and distribution of limited resources. While normative
goals are universal goals based on certain norms from all socio-economic aspects such as fair
income distribution, optimal growth rates etc. that are structured based on religious norms
also experienced by the socialist economic system. Actually, the purpose of the socialist
economic system is to correct various problems found in the capitalist economic system, so
that one of the goals of this socialist economic system is the creation of shared prosperity,
where with the implementation of the system there will no longer be various social classes in
society, economic equality occurs, and society will be free from all kinds of tyranny. This
goal turned out to be a failure, because the designers of the system did not understand what
human beings really meant. In this system, people were treated as cogs in a machine called
the state rather than a system built on the spontaneous and voluntary interactions of individual
economic actors.
Therefore, the development of Islamic economics as an alternative system is very
necessary, and with this alternative economic system the goal of economic activity to achieve
maqosidus shar'iah, which is an effort to improve the quality of economic activity to improve
the welfare of all human beings can be realized. The religious moral element is thus part of
the Islamic economic theory itself, and the Islamic economic mechanism to achieve prosperity
efficiently is built through the values of justice, equity and the development of the fiscal
sector in encouraging economic dynamics.
Conclusion
The above quote shows that Islamic economic thought in classical times was very
advanced and developed before Western scientists discussed it in the 18th-19th centuries. This
fact must be considered by contemporary economists, not only Muslim economists but also
non-Muslim economists around the world. Contribution of Islamic Economics to Modern
Economics In the past three decades, the study and research of Islamic economics has
flourished again. Various international forums on Islamic economics have been held
frequently and widely in various countries, such as conferences seminars, symposiums and
workshops. Dozens of doctors and professors of Islamic economics who are experts in both
conventional and shari'ah economics, appear as speakers in these forums. From their study,
they found that Islamic economic theory is actually not a new science or a science that is
fundamentally derived from modern economic theory that is developing today. Historical
facts show that classical Islamic scientists are the inventors and founders of all scientific
fields, including economics.
Circumstances in each period
There were several circumstances that resulted in the period of khulafa' al- rashidun not
many economists were born, including (1) Al Quran and al Hadith become the main source in
running people's lives. (2) The dominance of policy is more influenced by the attitude of the
leader as a representation of the successor to the Prophet Muhammad. This makes the caliph's
decision a reference in carrying out activities in the social field. (3) The scientific capacity of
each caliph is not the same, the period of leadership of the caliph is relatively different and the
end of his power 3 caliphs ended in political tragedy;. Abu Bakar's caliphate lasted for 2
years, 3 months, 11 days. Umar bin Khattab held the caliphate for 10 years, 6 months, 5 days.
Usman bin Affan ruled for 12 years less 12 days, and Ali bin Abi Talib ruled for 5 years and 3
months (Ahmad, 2000:12). (4) There has not been much friction thought with the Byzantine
(Greek) and Sasanian (Persian) scientific mainstream, because the mastery of Greece and
Persia has not yet reached the process of assimilating scientific potential (see Hodgson, 1999:
287).
While there were not many Muslim thinkers in the field of economics during the
Ummayah dynasty due to, among others; (1) The leader's busyness in expanding new
territories which was quite labor and time consuming. (2) The government system tended to
be Arab-centric, the Arab style was very dominant in the bureaucratic system during the
Ummayah dynasty. Non-Arabs - consisting of Persian descendants - commonly called mawali
were treated as second-class citizens. This situation affected the dialectic between the
bureaucracy and the Persians, in fact, as the more educated people were not so good. (3)
Geographically, Damascus, the capital of the Ummayah dynasty consisted mostly of Arabs, so
it was far from the interaction of the outside world, in contrast to Bagdad, the capital of the
Abbasid dynasty, which was close to Cteshipon, the former capital of the Sassanid empire,
Persia. (see Saefudin, 2002: 30-31)
While progress Islamic thought at period dynasty Abbasid dynasty was caused by; (1)
The contact between Islam and Persia became the development of science and philosophy
because Persia culturally played a major role in the development of the Greek scientific
tradition. (2) There was a great deal of activity in translating Greek literature into Arabic.
According to Mehdi Nakosteen, the translation movement was influenced by the previous
translation movement carried out during the Sassanid Empire, which was centered at the
Jundishapur Academy. This academy was the center for translating Greek and Hindu works of
science and philosophy into Pahlavi. From this school also came some important translations
from Sanskrit, Pahlavi and Syriac into Arabic. (Nakosteen, 1964:33) (3) The relative absence
of territorial clearances and rebellions ensured the stability of the government so that the
government's concentration on promoting intellectual aspects found opportunities. (4) The
existence of heterogeneous civilizations and cultures in Baghdad led to a process of
interaction between one culture and another; Arab, Greek, Persian, and Hindu which had an
impact on intellectual development. Bagdad was also inhabited by the rest of the population
native Chaldaeans and Suryani. (5) Bagdad was considered strategic and profitable because it
was passed by the Tigris and Euphrates rivers. (Saefuddin, 2002: 149) Goods can go in and
out through the river using boats so that Bagdad becomes a bustling economic satellite with
commodities being traded.
Then, the science of economics during the Ummayah or Abbasid era is certainly not as
familiar today. From the above historical developments we can note that (1) Economics is an
integral part of the political, social and cultural life of Islamic society so that economic
thought in the work of Muslim thinkers is difficult to separate from political and cultural
thought. This can be proven by the number of books written by Muslim thinkers who unite
economic problems with social, political and cultural problems. (2) Muslim thinkers are
known as Muslim economists because they have documented works through written works
that can be accessed by generations after him, and or known because there are students of the
Muslim thinker who documented his economic his economic thought. (3) Every Muslim
thinker expresses economic or social, political and cultural issues influenced by the
background of each Muslim thinker's life; residence, country, occupation and others.
The development of Muslim economic thought in Europe
The development of knowledge in the Islamic world influenced the progress of thought
in the European world. The influence to Europe is through several ways as follows:
Travels.
During the 11th and early centuries 12 Several Latin-Scholastic European scholars traveled in
several Arab countries to learn Arabic in order to gain knowledge to bring back to Europe.
During this period many students from Italy, Spain and Southern France attended Muslim
studies to learn mathematics, philosophy, medicine, cosmography, and mathematics other
studies in order to be able to teach in Western universities-which were established after the
studies in the Muslim world (Sharif, 1966:1367).
Translation.
From the 11th to the 14th century, there was a great deal of translation from Arabic to
Latin, not only of Arabic writing, but from Arabic to Hebrew. This was done in Spain, Italy
and France. Some notable translators are known from medieval history such as Adelard of
Bath, Constantine the African, Michael the Sct, Herman the German, Dominic Gundisilavi,
John of Seville, Plato of Trivoli, William of Luna, Gerard of Cremona, and Aflred of Sareshel
(Durant, 1950:910) According to Crombie during the Middle Ages, the translation of Arabic
into Latin was a major undertaking 14th and 15th centuries, Scholastic Europe was also not
directly influenced by the legacy of European thinkers, they still used the knowledge of
Muslim thinkers (see Crombie, 1963: 30).
Oral Tradition
Other important influential sources in the oral tradition are insufficiently available.
According to Chejne that specifically for Oral tradition is an important factor, and this is
evidenced by the literary relationship between the Arabs and the West. According to Chejne,
oral transmission took place over a long period of time and relations were maintained between
Muslims and Christians by being bilingual in Spanish. (see Chejne, 1980:111)
Trade
Some authors point out that trade brought the Arab world through Russian roads to
Polania, the Baltic, Scadinavia, central-western Europe and Iceland. Through trade resulting
in the spread of economic institutions, Arab money was used in the Christian Kingdom of the
North, where there had been no coins for 400 years. (see Hitti, 1943:144)
Diffusion and Institutions
Udovich reports that by the 15th century, there were already various contracts of trust
and partnership between Venetians and Arab merchants in Alexandria. These contractual
forms originated in the Islamic world and eventually spread in Latin Europe through contact
with Muslim scholars and scholars legal experts. Then, the emergence of various forms of
instruments and institutions facilitating the development of commerce and trade in Europe,
such as bills of exchange (siftajah), letters of credit (hawala), specialized trading centers
(funduq) and private banks (ma'una) (see Kramers, 1934:102).
Crusades
The crusades that took place from 1092 to 1292 were a long time for Europe to use to
gain knowledge from the Islamic world. According to Ferruollo, during this period the
Muslim community helped shape European attitudes, feelings and values (see Ferruollo,
1984: 42).
Why Europeans do not recognize that Islamic science is big enough to influence the
development of science in Europe, because (1) Europe in medieval times was known to be
very hostile to the Islamic world. This made it difficult for Europeans to accept the
advantages that had been obtained by the Muslim community (Ghanzanfar, 2002:153); and
(2) Scholars at that time borrowing without telling was a common practice, besides property
rights in the 12th century were not yet recognized. In this regard, the Spanish-era priest of the
Domician order, Raymund Martin - who influenced St. Thomas Aquinas - is known to have
sourced his book Pugio Fidei from al Ghazali's Tahafut al-Falasifa, Maqasid ul-Falasifa, al-
Munqid, Mishkat ul-Anwar, and Ihya Ulumuddin, without citing the references (see Sharif,
1966: 1361)).
If traced further, let alone listen back to how the development of Muslim thought about
Islamic economics that already exists (the author described above) which can be traced since
the life of the Prophet Muhammad SAW. Adam Smith was named the father of modern
economics along with the launch of economic thought in a book entitled 'An Inquiry into the
nature causes the wealth of nations'. From Smith's thought, a tradition of scientific thought
was born Classical economics emphasizes the freedom of market mechanisms in measuring
economic activity (laises faire) without being disturbed by government policies.
Adam Smith gave an example of an economically backward society is the Indians in
North America. While an example of an advanced economic society is the Arabs. The Arabs
Adam Smith meant were certainly a nation of traders in the days of the Prophet. Because in
the next explanation he said that the nation led by Muhammad and the generations after him.
From Adam Smith's explanation, it is clear that he recognized the superiority and
greatness of the Muslim economy in the past. Therefore, it is likely that he has indirectly
adopted Islamic economic theories. The indication shows that the progress of the Islamic
economy in medieval times was felt in England, Adam Smith's homeland, even long before he
was born. In 774 AD, King Offa in England at that time minted gold coins which were a
direct copy of the Islamic dinar, including its Arabic writing. All The writing on the coin is
Arabic, except on one side it says OFFAREX.
This reality shows that the Islamic dinar was then the strongest currency in the world. In
addition, the Muslim economy was far more advanced than Europe. It showed that Muslim
international trade had reached as far as Northern Europe. In 1764, Adam Smith gave up his
professorship in Glasgow England and chose his new career as economic advisor to the Duke
of Buccleuch. It was during this period that Smith traveled extensively abroad, especially to
France. Here he met many famous philosophers. Smith began writing The Wealth of Nations
while he was in France and completed it in 1766, in Kirdcaldy. And ten years later it was
published, namely in 1776. At that time in Europe there were already translated books by
Muslim economists. In fact, in the South of France, many professors were applying the
teaching patterns they had learned from Muslim countries. The explanation above shows that
the role of Muslim scientists is very significant to the rise of European intellectualism,
including in economic thought.
In the next development of classical economic thought was not always able to solve all
the economic problems that are growing increasingly complex, one proof is the emergence of
a severe depression of the world economy ahead of World War II (malaise period). From here
then inspired the birth of economic thought that emphasizes the need for the role of
government in regulating economic activity. This thinking was pioneered by John Maynard
Keynes who is considered a modern economic figure who developed the idea of short-term
economic analysis to encourage economic growth and overcome the problems of
unemployment and inflation.
Contemporary Islamic economic thought can be categorized into three groups of schools
of thought, namely:
Baqir As-Sadr's School
Mainstream Mazhab
Alternative Mazhab
Baqir As-Sadr's School
Scholars who became pioneers of this school are Baqir as- Sadr and Ali Shariati and
scholars from Iran and Iraq. According to As-Sadr's thinking that in studying economics must
be seen from two aspects, namely aspects of philosophy of economics or normative economics
and aspects of positive economics. An example of positive economics, i.e. studying the theory
of consumption and demand which is a common and acceptable phenomenon by anyone
without being influenced by idiology. Meanwhile, from the aspect of phylosophy of
economics which is the result of human thought, it will be found that each human group has
an idiology, a perspective that is not the same. An example is the discussion of 'justice'.
According to the concept of classical capitalism, what is meant by fairness is that you get
what you deserve, meaning 'you get what you have worked for'. Meanwhile, according to
classical socialism, the meaning of 'fair' is that no one has previlege to get more than others,
meaning that no one gets facilities to get more than others, in other words, everyone gets the
same. But Islam has its own meaning in interpreting 'fair' which is laa tadhlimuuna wa laa
tudhlamuuna meaning not to harm each other. So according to Baqir As-sadr's school of
thought, there is a difference in principle between economics and Islamic ideology, Therefore,
there will never be a common ground between Islam and economics.
Economics states that economic problems arise because of the problem of scarcity of
economic resources (scarcity) compared to human needs which are unlimited. In this case, the
school of Baqir As-Sadr rejects the understanding of economic science because in Islam it has
been confirmed that Allah Swt. has created creatures in this world including humans in the
sufficiency of economic resources as stated in His word:1
َ
َقَلَخَ
وََ
لُكَََ
فٍَءْيَش-َ
ُهَر دَقَََت-َْ
يِدْق-اًر
"...........................................................
.......... And He has created all things, and He has measured them out with precision."
Furthermore, according to the school of Baqir As-Sadr, the main problem faced by all
human beings in this world is the problem of unequal distribution of wealth. How the gift
given by Allah SWT to all creatures including humans can be distributed evenly and
proportionally. According to the school of Baqir As-Sadr to realize this, there are several
steps taken, namely:
replacing the term economics with the term iqtishad which implies that it is harmonious,
equal, and balanced (in between).
compile and reconstruct a separate economic science derived from the Qur'an and
Assunnah.
This is the contribution of Baqir As-sadr's school which is quite significant in the
discourse of the development of Islamic economics.
Mainstream Mazhab
Islamic economic thought from the mainstream school of thought is what gives the most
color in the discourse of Islamic economics now because most of its figures from the Islamic
Development Bank (IDB) which has funding facilities and cooperation networks with various
international institutions. The figures of the mainstream school include M. Umer Chapra, M.
A. Mannan, Nejatullah Siddiqi, Khurshid Ahmad, Monzer Kahf etc. equilibrium. But
relatively at a certain time and in a certain place there will still be a problem of scarcity. So
until here there is no difference between conventional economics and Islamic economics. The
difference is only in the mechanism of solving economic problems that according to the
mainstream school must refer to the Qur'an and Assunnah. While in the view of classical
capitalism the solution through the operation of the market mechanism, and classical
socialism through a centralized planning system.
Alternative Mazhab
In contrast to the views of the two previous schools, the alternative school sees that
Baqir as-Sadr's school of thought tries to explore and find a new Islamic economic paradigm
by leaving the conventional economic paradigm. While the mainstream school is considered
to be another face of the neoclassical view by eliminating the element of interest and adding
zakat.
The alternative school led by Prof. Timjur Kura (Chair of the Economics Department at
the University of Southern California), Prof. Jomo and Prof. Muhammad Arief contributes
through critical analysis of economics not only on the views of capitalism and socialism but
also criticizes the development of economic discourse. Islamic economic discourse. They
Islam is a view or ideology that is absolute truth that talks about Islamic economics means
studying human thinking about the verses of God and the sunnah of the Prophet in the
economic aspect. So according to this alternative school of Islamic economics is a
discourse that can still be debated because it is a human interpretation of the Qur'an
and Assunnah that needs to be tested and studied continuously.
Actually there is still one more Islamic economic discourse that is also beginning to
develop in the Islamic world, namely the thought of implementing a gold currency system as
a substitute for paper currency. (which was driven by Dr. Umar Vadillo and the Hisbut Tahrir
activist group) as happened / used during the Abbasid reign, namely the dinar and dirham
(gold and silver) currencies.
However, their thoughts cannot be included in a separate school of thought because they
are relative It is still premature and has not been supported by theoretical foundations and
empirical tests in the context of modern life. Moreover, in economic practice in the field it is
over valued so that instead a currency made of copper called "fulus" was created. Ibn
Taymiyah said: "There is no problem with money not coming from gold and silver as long as
the government is able to maintain its value". Al-Maghribi stated: "If the government prints
money continuously, it means that the government does not maintain the value of the
currency". In another section Ibn Qayyim warned: "If the government continuously prints
money, it can cause usury khafi (hidden usury) in the community, namely usury framed by
buying and selling transactions". This is in accordance with the meaning of the Hadith of the
Prophet, namely "There will come a time when people legalize usury by means of buying
and selling".
Muhammad Nejatullah Siddiqi in his book "Reading in Islamic Economic Thought"
explains the history of Islamic economic thought in four phases, namely:
Phase I: 113 H-451 H/731 M- 1058 M.
Phase II: 450 H-850 H / 1058 M-1446 M.
Phase III: 850 H-1350 H / 1446 M-1932 M.
Phase IV: 1932 AD-present.
In the first phase, it is known that there were 15 Muslim economists who actually
contributed to the development of economic thought, while at the same time there were no
economists from mainland Europe. Known at that time figures such as Abu Yusuf,
Muhammad bin Hasan al-Ahaibani, Harist bin Asan al-Muhadibi, Zaid bin Ali Zainal Abidin
bin Hussein bin Ali bin Abi Talib, Junaid Baghdadi, Ibn Miskawaih, Mawardi, etc.
The discourse that developed at that time was macroeconomic thinking concerning
fiscal policy and state finances as reported in Abu Yusuf's book of Al- Kharaj, which is a
book that is written by Abu Yusuf explains the mechanism for imposing taxes on land. Then
also Abu Ubaid in the book Al-Amwal describes how the management of state finances and
the state budget. In the book Al-Ahkam Al-Sulthaniyah by Mawardi discusses more about the
problem of government administration. And by other Islamic economic thinkers have also
been touched on the operation of unfair market mechanisms.
In the second phase of the development of Islamic economic thought, the discourse on
economics intensively began to develop even though on the other hand it was characterized
by changes in the structure of Islamic power which was getting wider. Several major figures
came to the fore such as Imam Al-Ghozali, Ibn Taymiyah, Ibn Khaldun, Ibn Qayyim. In this
second phase, the scientific discourse was directed more towards microeconomic analysis and
the function of money.
Imam Al-Ghozali addressed the issue of money and its functions. According to Imam
Al-Ghazali, it is not a problem to apply a non-gold and silver currency as long as the
government is able to maintain the stability of the currency as a legal tender. In one of his
writings he said "Money is like a mirror, colorless but can reflect all colors" and he also said
"If money has been traded, then it is the same as imprisoning the function of money", so that if
that happens it will cause depreciation of the currency exchange rate against other currencies.
He also explained about the prohibition of usury fadhl and its impact on the economy. Al-
Ghozali's intensive economic studies also touched on the issue of scales, price control (market
intervention), determination of taxes in an emergency, etc. In some parts of his thought also
touches on how the market mechanism works through the power of demand and supply.
(supply) in determining the market equilibrium.
An example of how to overcome the impact of price increases in order to stabilize
market prices is reflected in the government of Umar bin Khatab when there was inflation
caused by crop failure in the Hijaz area as the center of wheat production. The policy applied
by the government at that time to overcome it was through the market mechanism by
increasing the supply of wheat imported from Fuztadz Egypt so that prices returned to normal.
Conversely, if inflation is caused by market distortions such as monopolistic practices
and market hoarding, then the solution applied is not not by using the market mechanism but
through government intervention. Ibn Taymiyah has long suggested that the government
needs to conduct price intervention at the original equilibrium price to break the behavior of
monopolists and hoarding of goods. In contrast to government intervention, the views of
conventional economists suggest that Price fixing is done at the ceiling price or at the floor
price. Then what about the Prophet's hadith regarding the issue of price increases in Medina at
that time, namely "Allah is the one who determines prices. It is Allah who determines
provision and it is Allah who withholds provision". Apparently it was this hadith that later
inspired some economists to conceptualize the operation of the market mechanism by the
invisible hand. If so, is the proposition put forward by Ibn Taymiyyah regarding price
intervention contrary to the intent of the Prophet's hadith above? The answer is no! because
the direction and purpose of government intervention is so that the equilibrium price in the
market returns to the initial equilibrium position (equilibrium).
The third phase was a period of the rise of European civilization. At that time, 22
economists emerged while at the same time there were only a few Muslim scholars, namely
the Shah of Islam waliAllah with his work Hujjah Allah Al-Balighah which explains how the
provisions of sharia in relation to the behavior of an individual and the arrangement of social
organizations, other scholars are Muhammad Iqbal and Jamaluddin Al- Afghani.
We are familiar with the famous European economists such as JS Mill, Alfred Marshal
who formed the classical capitalist school. Behind them came the names of Karl Marx, Lenin
who gave birth to the socialist school. Then came JM Keynes with his Neo Classical school.
In this phase, economic thought from the West really dominated the world until now.
Meanwhile, Muslim scholars continue to experience moral and intellectual decline so that
most Islamic countries become colonies of western countries.
The fourth phase was characterized by the emergence of a new consciousness among
Muslims. A moral and intellectual awakening among Muslims gave birth to several names
such as Sayyid Qutb, Al- Maududi and Yusuf Qardhawi. However, his thoughts are more
inclined to the approach of fiqh, including the work of scientist Abu al- A'la al-Maududi from
Pakistan. It was not until a decade later that scientific works on Islamic economics began to
appear, especially after the first world conference of Muslims in Mecca in 1976 with the main
theme of Islamic economics (Qardhawi, 1997: 20-21).
Like a sleeping person, the study of Islamic economics as a science at the end of the
1970s was like stumbling awake, and this awakening seems to be related to the trends that
occurred in the world due to the economic crisis of 1974, with the birth of what is called the
flow or monetarist thinking, which further consensus Keynesian began to be abandoned
because it was considered no longer able to overcome the problems of contemporary
economics, this tendency is getting stronger after the collapse of Russia's socialist-communist
economy.
From 1980 until now, the awareness of Muslim thought developed quite rapidly, marked
by the emergence of three schools of Muslim thought, namely the Baqir As-Sadr school
(iqtishoduna), the mainstream school and the alternative school. In this phase, several
prominent names emerged such as MA. Mannan, Annas Zarka, Khurshid Ahmad, Nejatullah
Siddiqi, Hasanus Zaman, etc.
From research conducted by Umer Chapra, for example, it can be seen that the capitalist
economic system that relies on market mechanisms has failed to realize its goals, both
positive goals and normative goals.3 Similar failures achieving 'efficient and fair' economic
activity in the process of allocation and distribution of limited resources. While normative
goals are universal goals based on certain norms from all socio-economic aspects such as fair
income distribution, optimal growth rates etc. that are structured based on religious norms
also experienced by the socialist economic system. Actually, the purpose of the socialist
economic system is to correct various problems found in the capitalist economic system, so
that one of the goals of this socialist economic system is the creation of shared prosperity,
where with the implementation of the system there will no longer be various social classes in
society, economic equality occurs, and society will be free from all kinds of tyranny. This
goal turned out to be a failure, because the designers of the system did not understand what
human beings really meant. In this system, people were treated as cogs in a machine called
the state rather than a system built on the spontaneous and voluntary interactions of individual
economic actors.
Therefore, the development of Islamic economics as an alternative system is very
necessary, and with this alternative economic system the goal of economic activity to achieve
maqosidus shar'iah, which is an effort to improve the quality of economic activity to improve
the welfare of all human beings can be realized. The religious moral element is thus part of
the Islamic economic theory itself, and the Islamic economic mechanism to achieve prosperity
efficiently is built through the values of justice, equity and the development of the fiscal
sector in encouraging economic dynamics.
Conclusion
The above quote shows that Islamic economic thought in classical times was very
advanced and developed before Western scientists discussed it in the 18th-19th centuries. This
fact must be considered by contemporary economists, not only Muslim economists but also
non-Muslim economists around the world. Contribution of Islamic Economics to Modern
Economics In the past three decades, the study and research of Islamic economics has
flourished again. Various international forums on Islamic economics have been held
frequently and widely in various countries, such as conferences seminars, symposiums and
workshops. Dozens of doctors and professors of Islamic economics who are experts in both
conventional and shari'ah economics, appear as speakers in these forums. From their study,
they found that Islamic economic theory is actually not a new science or a science that is
fundamentally derived from modern economic theory that is developing today. Historical
facts show that classical Islamic scientists are the inventors and founders of all scientific
fields, including economics.
Circumstances in each period
There were several circumstances that resulted in the period of khulafa' al- rashidun not
many economists were born, including (1) Al Quran and al Hadith become the main source in
running people's lives. (2) The dominance of policy is more influenced by the attitude of the
leader as a representation of the successor to the Prophet Muhammad. This makes the caliph's
decision a reference in carrying out activities in the social field. (3) The scientific capacity of
each caliph is not the same, the period of leadership of the caliph is relatively different and the
end of his power 3 caliphs ended in political tragedy;. Abu Bakar's caliphate lasted for 2
years, 3 months, 11 days. Umar bin Khattab held the caliphate for 10 years, 6 months, 5 days.
Usman bin Affan ruled for 12 years less 12 days, and Ali bin Abi Talib ruled for 5 years and 3
months (Ahmad, 2000:12). (4) There has not been much friction thought with the Byzantine
(Greek) and Sasanian (Persian) scientific mainstream, because the mastery of Greece and
Persia has not yet reached the process of assimilating scientific potential (see Hodgson, 1999:
287).
While there were not many Muslim thinkers in the field of economics during the
Ummayah dynasty due to, among others; (1) The leader's busyness in expanding new
territories which was quite labor and time consuming. (2) The government system tended to
be Arab-centric, the Arab style was very dominant in the bureaucratic system during the
Ummayah dynasty. Non-Arabs - consisting of Persian descendants - commonly called mawali
were treated as second-class citizens. This situation affected the dialectic between the
bureaucracy and the Persians, in fact, as the more educated people were not so good. (3)
Geographically, Damascus, the capital of the Ummayah dynasty consisted mostly of Arabs, so
it was far from the interaction of the outside world, in contrast to Bagdad, the capital of the
Abbasid dynasty, which was close to Cteshipon, the former capital of the Sassanid empire,
Persia. (see Saefudin, 2002: 30-31)
While progress Islamic thought at period dynasty Abbasid dynasty was caused by; (1)
The contact between Islam and Persia became the development of science and philosophy
because Persia culturally played a major role in the development of the Greek scientific
tradition. (2) There was a great deal of activity in translating Greek literature into Arabic.
According to Mehdi Nakosteen, the translation movement was influenced by the previous
translation movement carried out during the Sassanid Empire, which was centered at the
Jundishapur Academy. This academy was the center for translating Greek and Hindu works of
science and philosophy into Pahlavi. From this school also came some important translations
from Sanskrit, Pahlavi and Syriac into Arabic. (Nakosteen, 1964:33) (3) The relative absence
of territorial clearances and rebellions ensured the stability of the government so that the
government's concentration on promoting intellectual aspects found opportunities. (4) The
existence of heterogeneous civilizations and cultures in Baghdad led to a process of
interaction between one culture and another; Arab, Greek, Persian, and Hindu which had an
impact on intellectual development. Bagdad was also inhabited by the rest of the population
native Chaldaeans and Suryani. (5) Bagdad was considered strategic and profitable because it
was passed by the Tigris and Euphrates rivers. (Saefuddin, 2002: 149) Goods can go in and
out through the river using boats so that Bagdad becomes a bustling economic satellite with
commodities being traded.
Then, the science of economics during the Ummayah or Abbasid era is certainly not as
familiar today. From the above historical developments we can note that (1) Economics is an
integral part of the political, social and cultural life of Islamic society so that economic
thought in the work of Muslim thinkers is difficult to separate from political and cultural
thought. This can be proven by the number of books written by Muslim thinkers who unite
economic problems with social, political and cultural problems. (2) Muslim thinkers are
known as Muslim economists because they have documented works through written works
that can be accessed by generations after him, and or known because there are students of the
Muslim thinker who documented his economic his economic thought. (3) Every Muslim
thinker expresses economic or social, political and cultural issues influenced by the
background of each Muslim thinker's life; residence, country, occupation and others.
The development of Muslim economic thought in Europe
The development of knowledge in the Islamic world influenced the progress of thought
in the European world. The influence to Europe is through several ways as follows:
Travels.
During the 11th and early centuries 12 Several Latin-Scholastic European scholars traveled in
several Arab countries to learn Arabic in order to gain knowledge to bring back to Europe.
During this period many students from Italy, Spain and Southern France attended Muslim
studies to learn mathematics, philosophy, medicine, cosmography, and mathematics other
studies in order to be able to teach in Western universities-which were established after the
studies in the Muslim world (Sharif, 1966:1367).
Translation.
From the 11th to the 14th century, there was a great deal of translation from Arabic to
Latin, not only of Arabic writing, but from Arabic to Hebrew. This was done in Spain, Italy
and France. Some notable translators are known from medieval history such as Adelard of
Bath, Constantine the African, Michael the Sct, Herman the German, Dominic Gundisilavi,
John of Seville, Plato of Trivoli, William of Luna, Gerard of Cremona, and Aflred of Sareshel
(Durant, 1950:910) According to Crombie during the Middle Ages, the translation of Arabic
into Latin was a major undertaking 14th and 15th centuries, Scholastic Europe was also not
directly influenced by the legacy of European thinkers, they still used the knowledge of
Muslim thinkers (see Crombie, 1963: 30).
Oral Tradition
Other important influential sources in the oral tradition are insufficiently available.
According to Chejne that specifically for Oral tradition is an important factor, and this is
evidenced by the literary relationship between the Arabs and the West. According to Chejne,
oral transmission took place over a long period of time and relations were maintained between
Muslims and Christians by being bilingual in Spanish. (see Chejne, 1980:111)
Trade
Some authors point out that trade brought the Arab world through Russian roads to
Polania, the Baltic, Scadinavia, central-western Europe and Iceland. Through trade resulting
in the spread of economic institutions, Arab money was used in the Christian Kingdom of the
North, where there had been no coins for 400 years. (see Hitti, 1943:144)
Diffusion and Institutions
Udovich reports that by the 15th century, there were already various contracts of trust
and partnership between Venetians and Arab merchants in Alexandria. These contractual
forms originated in the Islamic world and eventually spread in Latin Europe through contact
with Muslim scholars and scholars legal experts. Then, the emergence of various forms of
instruments and institutions facilitating the development of commerce and trade in Europe,
such as bills of exchange (siftajah), letters of credit (hawala), specialized trading centers
(funduq) and private banks (ma'una) (see Kramers, 1934:102).
Crusades
The crusades that took place from 1092 to 1292 were a long time for Europe to use to
gain knowledge from the Islamic world. According to Ferruollo, during this period the
Muslim community helped shape European attitudes, feelings and values (see Ferruollo,
1984: 42).
Why Europeans do not recognize that Islamic science is big enough to influence the
development of science in Europe, because (1) Europe in medieval times was known to be
very hostile to the Islamic world. This made it difficult for Europeans to accept the
advantages that had been obtained by the Muslim community (Ghanzanfar, 2002:153); and
(2) Scholars at that time borrowing without telling was a common practice, besides property
rights in the 12th century were not yet recognized. In this regard, the Spanish-era priest of the
Domician order, Raymund Martin - who influenced St. Thomas Aquinas - is known to have
sourced his book Pugio Fidei from al Ghazali's Tahafut al-Falasifa, Maqasid ul-Falasifa, al-
Munqid, Mishkat ul-Anwar, and Ihya Ulumuddin, without citing the references (see Sharif,
1966: 1361)).
If traced further, let alone listen back to how the development of Muslim thought about
Islamic economics that already exists (the author described above) which can be traced since
the life of the Prophet Muhammad SAW. Adam Smith was named the father of modern
economics along with the launch of economic thought in a book entitled 'An Inquiry into the
nature causes the wealth of nations'. From Smith's thought, a tradition of scientific thought
was born Classical economics emphasizes the freedom of market mechanisms in measuring
economic activity (laises faire) without being disturbed by government policies.
Adam Smith gave an example of an economically backward society is the Indians in
North America. While an example of an advanced economic society is the Arabs. The Arabs
Adam Smith meant were certainly a nation of traders in the days of the Prophet. Because in
the next explanation he said that the nation led by Muhammad and the generations after him.
From Adam Smith's explanation, it is clear that he recognized the superiority and
greatness of the Muslim economy in the past. Therefore, it is likely that he has indirectly
adopted Islamic economic theories. The indication shows that the progress of the Islamic
economy in medieval times was felt in England, Adam Smith's homeland, even long before he
was born. In 774 AD, King Offa in England at that time minted gold coins which were a
direct copy of the Islamic dinar, including its Arabic writing. All The writing on the coin is
Arabic, except on one side it says OFFAREX.
This reality shows that the Islamic dinar was then the strongest currency in the world. In
addition, the Muslim economy was far more advanced than Europe. It showed that Muslim
international trade had reached as far as Northern Europe. In 1764, Adam Smith gave up his
professorship in Glasgow England and chose his new career as economic advisor to the Duke
of Buccleuch. It was during this period that Smith traveled extensively abroad, especially to
France. Here he met many famous philosophers. Smith began writing The Wealth of Nations
while he was in France and completed it in 1766, in Kirdcaldy. And ten years later it was
published, namely in 1776. At that time in Europe there were already translated books by
Muslim economists. In fact, in the South of France, many professors were applying the
teaching patterns they had learned from Muslim countries. The explanation above shows that
the role of Muslim scientists is very significant to the rise of European intellectualism,
including in economic thought.
In the next development of classical economic thought was not always able to solve all
the economic problems that are growing increasingly complex, one proof is the emergence of
a severe depression of the world economy ahead of World War II (malaise period). From here
then inspired the birth of economic thought that emphasizes the need for the role of
government in regulating economic activity. This thinking was pioneered by John Maynard
Keynes who is considered a modern economic figure who developed the idea of short-term
economic analysis to encourage economic growth and overcome the problems of
unemployment and inflation.
Contemporary Islamic economic thought can be categorized into three groups of schools
of thought, namely:
Baqir As-Sadr's School
Mainstream Mazhab
Alternative Mazhab
Baqir As-Sadr's School
Scholars who became pioneers of this school are Baqir as- Sadr and Ali Shariati and
scholars from Iran and Iraq. According to As-Sadr's thinking that in studying economics must
be seen from two aspects, namely aspects of philosophy of economics or normative economics
and aspects of positive economics. An example of positive economics, i.e. studying the theory
of consumption and demand which is a common and acceptable phenomenon by anyone
without being influenced by idiology. Meanwhile, from the aspect of phylosophy of
economics which is the result of human thought, it will be found that each human group has
an idiology, a perspective that is not the same. An example is the discussion of 'justice'.
According to the concept of classical capitalism, what is meant by fairness is that you get
what you deserve, meaning 'you get what you have worked for'. Meanwhile, according to
classical socialism, the meaning of 'fair' is that no one has previlege to get more than others,
meaning that no one gets facilities to get more than others, in other words, everyone gets the
same. But Islam has its own meaning in interpreting 'fair' which is laa tadhlimuuna wa laa
tudhlamuuna meaning not to harm each other. So according to Baqir As-sadr's school of
thought, there is a difference in principle between economics and Islamic ideology, Therefore,
there will never be a common ground between Islam and economics.
Economics states that economic problems arise because of the problem of scarcity of
economic resources (scarcity) compared to human needs which are unlimited. In this case, the
school of Baqir As-Sadr rejects the understanding of economic science because in Islam it has
been confirmed that Allah Swt. has created creatures in this world including humans in the
sufficiency of economic resources as stated in His word:1
َ
َقَلَخَ
وََ
لُكَََ
فٍَءْيَش-َ
ُهَر دَقَََت-َْ
يِدْق-اًر
"...........................................................
.......... And He has created all things, and He has measured them out with precision."
Furthermore, according to the school of Baqir As-Sadr, the main problem faced by all
human beings in this world is the problem of unequal distribution of wealth. How the gift
given by Allah SWT to all creatures including humans can be distributed evenly and
proportionally. According to the school of Baqir As-Sadr to realize this, there are several
steps taken, namely:
replacing the term economics with the term iqtishad which implies that it is harmonious,
equal, and balanced (in between).
compile and reconstruct a separate economic science derived from the Qur'an and
Assunnah.
This is the contribution of Baqir As-sadr's school which is quite significant in the
discourse of the development of Islamic economics.
Mainstream Mazhab
Islamic economic thought from the mainstream school of thought is what gives the most
color in the discourse of Islamic economics now because most of its figures from the Islamic
Development Bank (IDB) which has funding facilities and cooperation networks with various
international institutions. The figures of the mainstream school include M. Umer Chapra, M.
A. Mannan, Nejatullah Siddiqi, Khurshid Ahmad, Monzer Kahf etc. equilibrium. But
relatively at a certain time and in a certain place there will still be a problem of scarcity. So
until here there is no difference between conventional economics and Islamic economics. The
difference is only in the mechanism of solving economic problems that according to the
mainstream school must refer to the Qur'an and Assunnah. While in the view of classical
capitalism the solution through the operation of the market mechanism, and classical
socialism through a centralized planning system.
Alternative Mazhab
In contrast to the views of the two previous schools, the alternative school sees that
Baqir as-Sadr's school of thought tries to explore and find a new Islamic economic paradigm
by leaving the conventional economic paradigm. While the mainstream school is considered
to be another face of the neoclassical view by eliminating the element of interest and adding
zakat.
The alternative school led by Prof. Timjur Kura (Chair of the Economics Department at
the University of Southern California), Prof. Jomo and Prof. Muhammad Arief contributes
through critical analysis of economics not only on the views of capitalism and socialism but
also criticizes the development of economic discourse. Islamic economic discourse. They
Islam is a view or ideology that is absolute truth that talks about Islamic economics means
studying human thinking about the verses of God and the sunnah of the Prophet in the
economic aspect. So according to this alternative school of Islamic economics is a
discourse that can still be debated because it is a human interpretation of the Qur'an
and Assunnah that needs to be tested and studied continuously.
Actually there is still one more Islamic economic discourse that is also beginning to
develop in the Islamic world, namely the thought of implementing a gold currency system as
a substitute for paper currency. (which was driven by Dr. Umar Vadillo and the Hisbut Tahrir
activist group) as happened / used during the Abbasid reign, namely the dinar and dirham
(gold and silver) currencies.
However, their thoughts cannot be included in a separate school of thought because they
are relative It is still premature and has not been supported by theoretical foundations and
empirical tests in the context of modern life. Moreover, in economic practice in the field it is
over valued so that instead a currency made of copper called "fulus" was created. Ibn
Taymiyah said: "There is no problem with money not coming from gold and silver as long as
the government is able to maintain its value". Al-Maghribi stated: "If the government prints
money continuously, it means that the government does not maintain the value of the
currency". In another section Ibn Qayyim warned: "If the government continuously prints
money, it can cause usury khafi (hidden usury) in the community, namely usury framed by
buying and selling transactions". This is in accordance with the meaning of the Hadith of the
Prophet, namely "There will come a time when people legalize usury by means of buying
and selling".
Muhammad Nejatullah Siddiqi in his book "Reading in Islamic Economic Thought"
explains the history of Islamic economic thought in four phases, namely:
Phase I: 113 H-451 H/731 M- 1058 M.
Phase II: 450 H-850 H / 1058 M-1446 M.
Phase III: 850 H-1350 H / 1446 M-1932 M.
Phase IV: 1932 AD-present.
In the first phase, it is known that there were 15 Muslim economists who actually
contributed to the development of economic thought, while at the same time there were no
economists from mainland Europe. Known at that time figures such as Abu Yusuf,
Muhammad bin Hasan al-Ahaibani, Harist bin Asan al-Muhadibi, Zaid bin Ali Zainal Abidin
bin Hussein bin Ali bin Abi Talib, Junaid Baghdadi, Ibn Miskawaih, Mawardi, etc.
The discourse that developed at that time was macroeconomic thinking concerning
fiscal policy and state finances as reported in Abu Yusuf's book of Al- Kharaj, which is a
book that is written by Abu Yusuf explains the mechanism for imposing taxes on land. Then
also Abu Ubaid in the book Al-Amwal describes how the management of state finances and
the state budget. In the book Al-Ahkam Al-Sulthaniyah by Mawardi discusses more about the
problem of government administration. And by other Islamic economic thinkers have also
been touched on the operation of unfair market mechanisms.
In the second phase of the development of Islamic economic thought, the discourse on
economics intensively began to develop even though on the other hand it was characterized
by changes in the structure of Islamic power which was getting wider. Several major figures
came to the fore such as Imam Al-Ghozali, Ibn Taymiyah, Ibn Khaldun, Ibn Qayyim. In this
second phase, the scientific discourse was directed more towards microeconomic analysis and
the function of money.
Imam Al-Ghozali addressed the issue of money and its functions. According to Imam
Al-Ghazali, it is not a problem to apply a non-gold and silver currency as long as the
government is able to maintain the stability of the currency as a legal tender. In one of his
writings he said "Money is like a mirror, colorless but can reflect all colors" and he also said
"If money has been traded, then it is the same as imprisoning the function of money", so that if
that happens it will cause depreciation of the currency exchange rate against other currencies.
He also explained about the prohibition of usury fadhl and its impact on the economy. Al-
Ghozali's intensive economic studies also touched on the issue of scales, price control (market
intervention), determination of taxes in an emergency, etc. In some parts of his thought also
touches on how the market mechanism works through the power of demand and supply.
(supply) in determining the market equilibrium.
An example of how to overcome the impact of price increases in order to stabilize
market prices is reflected in the government of Umar bin Khatab when there was inflation
caused by crop failure in the Hijaz area as the center of wheat production. The policy applied
by the government at that time to overcome it was through the market mechanism by
increasing the supply of wheat imported from Fuztadz Egypt so that prices returned to normal.
Conversely, if inflation is caused by market distortions such as monopolistic practices
and market hoarding, then the solution applied is not not by using the market mechanism but
through government intervention. Ibn Taymiyah has long suggested that the government
needs to conduct price intervention at the original equilibrium price to break the behavior of
monopolists and hoarding of goods. In contrast to government intervention, the views of
conventional economists suggest that Price fixing is done at the ceiling price or at the floor
price. Then what about the Prophet's hadith regarding the issue of price increases in Medina at
that time, namely "Allah is the one who determines prices. It is Allah who determines
provision and it is Allah who withholds provision". Apparently it was this hadith that later
inspired some economists to conceptualize the operation of the market mechanism by the
invisible hand. If so, is the proposition put forward by Ibn Taymiyyah regarding price
intervention contrary to the intent of the Prophet's hadith above? The answer is no! because
the direction and purpose of government intervention is so that the equilibrium price in the
market returns to the initial equilibrium position (equilibrium).
The third phase was a period of the rise of European civilization. At that time, 22
economists emerged while at the same time there were only a few Muslim scholars, namely
the Shah of Islam waliAllah with his work Hujjah Allah Al-Balighah which explains how the
provisions of sharia in relation to the behavior of an individual and the arrangement of social
organizations, other scholars are Muhammad Iqbal and Jamaluddin Al- Afghani.
We are familiar with the famous European economists such as JS Mill, Alfred Marshal
who formed the classical capitalist school. Behind them came the names of Karl Marx, Lenin
who gave birth to the socialist school. Then came JM Keynes with his Neo Classical school.
In this phase, economic thought from the West really dominated the world until now.
Meanwhile, Muslim scholars continue to experience moral and intellectual decline so that
most Islamic countries become colonies of western countries.
The fourth phase was characterized by the emergence of a new consciousness among
Muslims. A moral and intellectual awakening among Muslims gave birth to several names
such as Sayyid Qutb, Al- Maududi and Yusuf Qardhawi. However, his thoughts are more
inclined to the approach of fiqh, including the work of scientist Abu al- A'la al-Maududi from
Pakistan. It was not until a decade later that scientific works on Islamic economics began to
appear, especially after the first world conference of Muslims in Mecca in 1976 with the main
theme of Islamic economics (Qardhawi, 1997: 20-21).
Like a sleeping person, the study of Islamic economics as a science at the end of the
1970s was like stumbling awake, and this awakening seems to be related to the trends that
occurred in the world due to the economic crisis of 1974, with the birth of what is called the
flow or monetarist thinking, which further consensus Keynesian began to be abandoned
because it was considered no longer able to overcome the problems of contemporary
economics, this tendency is getting stronger after the collapse of Russia's socialist-communist
economy.
From 1980 until now, the awareness of Muslim thought developed quite rapidly, marked
by the emergence of three schools of Muslim thought, namely the Baqir As-Sadr school
(iqtishoduna), the mainstream school and the alternative school. In this phase, several
prominent names emerged such as MA. Mannan, Annas Zarka, Khurshid Ahmad, Nejatullah
Siddiqi, Hasanus Zaman, etc.
From research conducted by Umer Chapra, for example, it can be seen that the capitalist
economic system that relies on market mechanisms has failed to realize its goals, both
positive goals and normative goals.3 Similar failures achieving 'efficient and fair' economic
activity in the process of allocation and distribution of limited resources. While normative
goals are universal goals based on certain norms from all socio-economic aspects such as fair
income distribution, optimal growth rates etc. that are structured based on religious norms
also experienced by the socialist economic system. Actually, the purpose of the socialist
economic system is to correct various problems found in the capitalist economic system, so
that one of the goals of this socialist economic system is the creation of shared prosperity,
where with the implementation of the system there will no longer be various social classes in
society, economic equality occurs, and society will be free from all kinds of tyranny. This
goal turned out to be a failure, because the designers of the system did not understand what
human beings really meant. In this system, people were treated as cogs in a machine called
the state rather than a system built on the spontaneous and voluntary interactions of individual
economic actors.
Therefore, the development of Islamic economics as an alternative system is very
necessary, and with this alternative economic system the goal of economic activity to achieve
maqosidus shar'iah, which is an effort to improve the quality of economic activity to improve
the welfare of all human beings can be realized. The religious moral element is thus part of
the Islamic economic theory itself, and the Islamic economic mechanism to achieve prosperity
efficiently is built through the values of justice, equity and the development of the fiscal
sector in encouraging economic dynamics.
Conclusion
The above quote shows that Islamic economic thought in classical times was very
advanced and developed before Western scientists discussed it in the 18th-19th centuries. This
fact must be considered by contemporary economists, not only Muslim economists but also
non-Muslim economists around the world. Contribution of Islamic Economics to Modern
Economics In the past three decades, the study and research of Islamic economics has
flourished again. Various international forums on Islamic economics have been held
frequently and widely in various countries, such as conferences seminars, symposiums and
workshops. Dozens of doctors and professors of Islamic economics who are experts in both
conventional and shari'ah economics, appear as speakers in these forums. From their study,
they found that Islamic economic theory is actually not a new science or a science that is
fundamentally derived from modern economic theory that is developing today. Historical
facts show that classical Islamic scientists are the inventors and founders of all scientific
fields, including economics.
Circumstances in each period
There were several circumstances that resulted in the period of khulafa' al- rashidun not
many economists were born, including (1) Al Quran and al Hadith become the main source in
running people's lives. (2) The dominance of policy is more influenced by the attitude of the
leader as a representation of the successor to the Prophet Muhammad. This makes the caliph's
decision a reference in carrying out activities in the social field. (3) The scientific capacity of
each caliph is not the same, the period of leadership of the caliph is relatively different and the
end of his power 3 caliphs ended in political tragedy;. Abu Bakar's caliphate lasted for 2
years, 3 months, 11 days. Umar bin Khattab held the caliphate for 10 years, 6 months, 5 days.
Usman bin Affan ruled for 12 years less 12 days, and Ali bin Abi Talib ruled for 5 years and 3
months (Ahmad, 2000:12). (4) There has not been much friction thought with the Byzantine
(Greek) and Sasanian (Persian) scientific mainstream, because the mastery of Greece and
Persia has not yet reached the process of assimilating scientific potential (see Hodgson, 1999:
287).
While there were not many Muslim thinkers in the field of economics during the
Ummayah dynasty due to, among others; (1) The leader's busyness in expanding new
territories which was quite labor and time consuming. (2) The government system tended to
be Arab-centric, the Arab style was very dominant in the bureaucratic system during the
Ummayah dynasty. Non-Arabs - consisting of Persian descendants - commonly called mawali
were treated as second-class citizens. This situation affected the dialectic between the
bureaucracy and the Persians, in fact, as the more educated people were not so good. (3)
Geographically, Damascus, the capital of the Ummayah dynasty consisted mostly of Arabs, so
it was far from the interaction of the outside world, in contrast to Bagdad, the capital of the
Abbasid dynasty, which was close to Cteshipon, the former capital of the Sassanid empire,
Persia. (see Saefudin, 2002: 30-31)
While progress Islamic thought at period dynasty Abbasid dynasty was caused by; (1)
The contact between Islam and Persia became the development of science and philosophy
because Persia culturally played a major role in the development of the Greek scientific
tradition. (2) There was a great deal of activity in translating Greek literature into Arabic.
According to Mehdi Nakosteen, the translation movement was influenced by the previous
translation movement carried out during the Sassanid Empire, which was centered at the
Jundishapur Academy. This academy was the center for translating Greek and Hindu works of
science and philosophy into Pahlavi. From this school also came some important translations
from Sanskrit, Pahlavi and Syriac into Arabic. (Nakosteen, 1964:33) (3) The relative absence
of territorial clearances and rebellions ensured the stability of the government so that the
government's concentration on promoting intellectual aspects found opportunities. (4) The
existence of heterogeneous civilizations and cultures in Baghdad led to a process of
interaction between one culture and another; Arab, Greek, Persian, and Hindu which had an
impact on intellectual development. Bagdad was also inhabited by the rest of the population
native Chaldaeans and Suryani. (5) Bagdad was considered strategic and profitable because it
was passed by the Tigris and Euphrates rivers. (Saefuddin, 2002: 149) Goods can go in and
out through the river using boats so that Bagdad becomes a bustling economic satellite with
commodities being traded.
Then, the science of economics during the Ummayah or Abbasid era is certainly not as
familiar today. From the above historical developments we can note that (1) Economics is an
integral part of the political, social and cultural life of Islamic society so that economic
thought in the work of Muslim thinkers is difficult to separate from political and cultural
thought. This can be proven by the number of books written by Muslim thinkers who unite
economic problems with social, political and cultural problems. (2) Muslim thinkers are
known as Muslim economists because they have documented works through written works
that can be accessed by generations after him, and or known because there are students of the
Muslim thinker who documented his economic his economic thought. (3) Every Muslim
thinker expresses economic or social, political and cultural issues influenced by the
background of each Muslim thinker's life; residence, country, occupation and others.
The development of Muslim economic thought in Europe
The development of knowledge in the Islamic world influenced the progress of thought
in the European world. The influence to Europe is through several ways as follows:
Travels.
During the 11th and early centuries 12 Several Latin-Scholastic European scholars traveled in
several Arab countries to learn Arabic in order to gain knowledge to bring back to Europe.
During this period many students from Italy, Spain and Southern France attended Muslim
studies to learn mathematics, philosophy, medicine, cosmography, and mathematics other
studies in order to be able to teach in Western universities-which were established after the
studies in the Muslim world (Sharif, 1966:1367).
Translation.
From the 11th to the 14th century, there was a great deal of translation from Arabic to
Latin, not only of Arabic writing, but from Arabic to Hebrew. This was done in Spain, Italy
and France. Some notable translators are known from medieval history such as Adelard of
Bath, Constantine the African, Michael the Sct, Herman the German, Dominic Gundisilavi,
John of Seville, Plato of Trivoli, William of Luna, Gerard of Cremona, and Aflred of Sareshel
(Durant, 1950:910) According to Crombie during the Middle Ages, the translation of Arabic
into Latin was a major undertaking 14th and 15th centuries, Scholastic Europe was also not
directly influenced by the legacy of European thinkers, they still used the knowledge of
Muslim thinkers (see Crombie, 1963: 30).
Oral Tradition
Other important influential sources in the oral tradition are insufficiently available.
According to Chejne that specifically for Oral tradition is an important factor, and this is
evidenced by the literary relationship between the Arabs and the West. According to Chejne,
oral transmission took place over a long period of time and relations were maintained between
Muslims and Christians by being bilingual in Spanish. (see Chejne, 1980:111)
Trade
Some authors point out that trade brought the Arab world through Russian roads to
Polania, the Baltic, Scadinavia, central-western Europe and Iceland. Through trade resulting
in the spread of economic institutions, Arab money was used in the Christian Kingdom of the
North, where there had been no coins for 400 years. (see Hitti, 1943:144)
Diffusion and Institutions
Udovich reports that by the 15th century, there were already various contracts of trust
and partnership between Venetians and Arab merchants in Alexandria. These contractual
forms originated in the Islamic world and eventually spread in Latin Europe through contact
with Muslim scholars and scholars legal experts. Then, the emergence of various forms of
instruments and institutions facilitating the development of commerce and trade in Europe,
such as bills of exchange (siftajah), letters of credit (hawala), specialized trading centers
(funduq) and private banks (ma'una) (see Kramers, 1934:102).
Crusades
The crusades that took place from 1092 to 1292 were a long time for Europe to use to
gain knowledge from the Islamic world. According to Ferruollo, during this period the
Muslim community helped shape European attitudes, feelings and values (see Ferruollo,
1984: 42).
Why Europeans do not recognize that Islamic science is big enough to influence the
development of science in Europe, because (1) Europe in medieval times was known to be
very hostile to the Islamic world. This made it difficult for Europeans to accept the
advantages that had been obtained by the Muslim community (Ghanzanfar, 2002:153); and
(2) Scholars at that time borrowing without telling was a common practice, besides property
rights in the 12th century were not yet recognized. In this regard, the Spanish-era priest of the
Domician order, Raymund Martin - who influenced St. Thomas Aquinas - is known to have
sourced his book Pugio Fidei from al Ghazali's Tahafut al-Falasifa, Maqasid ul-Falasifa, al-
Munqid, Mishkat ul-Anwar, and Ihya Ulumuddin, without citing the references (see Sharif,
1966: 1361)).
If traced further, let alone listen back to how the development of Muslim thought about
Islamic economics that already exists (the author described above) which can be traced since
the life of the Prophet Muhammad SAW. Adam Smith was named the father of modern
economics along with the launch of economic thought in a book entitled 'An Inquiry into the
nature causes the wealth of nations'. From Smith's thought, a tradition of scientific thought
was born Classical economics emphasizes the freedom of market mechanisms in measuring
economic activity (laises faire) without being disturbed by government policies.
Adam Smith gave an example of an economically backward society is the Indians in
North America. While an example of an advanced economic society is the Arabs. The Arabs
Adam Smith meant were certainly a nation of traders in the days of the Prophet. Because in
the next explanation he said that the nation led by Muhammad and the generations after him.
From Adam Smith's explanation, it is clear that he recognized the superiority and
greatness of the Muslim economy in the past. Therefore, it is likely that he has indirectly
adopted Islamic economic theories. The indication shows that the progress of the Islamic
economy in medieval times was felt in England, Adam Smith's homeland, even long before he
was born. In 774 AD, King Offa in England at that time minted gold coins which were a
direct copy of the Islamic dinar, including its Arabic writing. All The writing on the coin is
Arabic, except on one side it says OFFAREX.
This reality shows that the Islamic dinar was then the strongest currency in the world. In
addition, the Muslim economy was far more advanced than Europe. It showed that Muslim
international trade had reached as far as Northern Europe. In 1764, Adam Smith gave up his
professorship in Glasgow England and chose his new career as economic advisor to the Duke
of Buccleuch. It was during this period that Smith traveled extensively abroad, especially to
France. Here he met many famous philosophers. Smith began writing The Wealth of Nations
while he was in France and completed it in 1766, in Kirdcaldy. And ten years later it was
published, namely in 1776. At that time in Europe there were already translated books by
Muslim economists. In fact, in the South of France, many professors were applying the
teaching patterns they had learned from Muslim countries. The explanation above shows that
the role of Muslim scientists is very significant to the rise of European intellectualism,
including in economic thought.
In the next development of classical economic thought was not always able to solve all
the economic problems that are growing increasingly complex, one proof is the emergence of
a severe depression of the world economy ahead of World War II (malaise period). From here
then inspired the birth of economic thought that emphasizes the need for the role of
government in regulating economic activity. This thinking was pioneered by John Maynard
Keynes who is considered a modern economic figure who developed the idea of short-term
economic analysis to encourage economic growth and overcome the problems of
unemployment and inflation.
Contemporary Islamic economic thought can be categorized into three groups of schools
of thought, namely:
Baqir As-Sadr's School
Mainstream Mazhab
Alternative Mazhab
Baqir As-Sadr's School
Scholars who became pioneers of this school are Baqir as- Sadr and Ali Shariati and
scholars from Iran and Iraq. According to As-Sadr's thinking that in studying economics must
be seen from two aspects, namely aspects of philosophy of economics or normative economics
and aspects of positive economics. An example of positive economics, i.e. studying the theory
of consumption and demand which is a common and acceptable phenomenon by anyone
without being influenced by idiology. Meanwhile, from the aspect of phylosophy of
economics which is the result of human thought, it will be found that each human group has
an idiology, a perspective that is not the same. An example is the discussion of 'justice'.
According to the concept of classical capitalism, what is meant by fairness is that you get
what you deserve, meaning 'you get what you have worked for'. Meanwhile, according to
classical socialism, the meaning of 'fair' is that no one has previlege to get more than others,
meaning that no one gets facilities to get more than others, in other words, everyone gets the
same. But Islam has its own meaning in interpreting 'fair' which is laa tadhlimuuna wa laa
tudhlamuuna meaning not to harm each other. So according to Baqir As-sadr's school of
thought, there is a difference in principle between economics and Islamic ideology, Therefore,
there will never be a common ground between Islam and economics.
Economics states that economic problems arise because of the problem of scarcity of
economic resources (scarcity) compared to human needs which are unlimited. In this case, the
school of Baqir As-Sadr rejects the understanding of economic science because in Islam it has
been confirmed that Allah Swt. has created creatures in this world including humans in the
sufficiency of economic resources as stated in His word:1
َ
َقَلَخَ
وََ
لُكَََ
فٍَءْيَش-َ
ُهَر دَقَََت-َْ
يِدْق-اًر
"...........................................................
.......... And He has created all things, and He has measured them out with precision."
Furthermore, according to the school of Baqir As-Sadr, the main problem faced by all
human beings in this world is the problem of unequal distribution of wealth. How the gift
given by Allah SWT to all creatures including humans can be distributed evenly and
proportionally. According to the school of Baqir As-Sadr to realize this, there are several
steps taken, namely:
replacing the term economics with the term iqtishad which implies that it is harmonious,
equal, and balanced (in between).
compile and reconstruct a separate economic science derived from the Qur'an and
Assunnah.
This is the contribution of Baqir As-sadr's school which is quite significant in the
discourse of the development of Islamic economics.
Mainstream Mazhab
Islamic economic thought from the mainstream school of thought is what gives the most
color in the discourse of Islamic economics now because most of its figures from the Islamic
Development Bank (IDB) which has funding facilities and cooperation networks with various
international institutions. The figures of the mainstream school include M. Umer Chapra, M.
A. Mannan, Nejatullah Siddiqi, Khurshid Ahmad, Monzer Kahf etc. equilibrium. But
relatively at a certain time and in a certain place there will still be a problem of scarcity. So
until here there is no difference between conventional economics and Islamic economics. The
difference is only in the mechanism of solving economic problems that according to the
mainstream school must refer to the Qur'an and Assunnah. While in the view of classical
capitalism the solution through the operation of the market mechanism, and classical
socialism through a centralized planning system.
Alternative Mazhab
In contrast to the views of the two previous schools, the alternative school sees that
Baqir as-Sadr's school of thought tries to explore and find a new Islamic economic paradigm
by leaving the conventional economic paradigm. While the mainstream school is considered
to be another face of the neoclassical view by eliminating the element of interest and adding
zakat.
The alternative school led by Prof. Timjur Kura (Chair of the Economics Department at
the University of Southern California), Prof. Jomo and Prof. Muhammad Arief contributes
through critical analysis of economics not only on the views of capitalism and socialism but
also criticizes the development of economic discourse. Islamic economic discourse. They
Islam is a view or ideology that is absolute truth that talks about Islamic economics means
studying human thinking about the verses of God and the sunnah of the Prophet in the
economic aspect. So according to this alternative school of Islamic economics is a
discourse that can still be debated because it is a human interpretation of the Qur'an
and Assunnah that needs to be tested and studied continuously.
Actually there is still one more Islamic economic discourse that is also beginning to
develop in the Islamic world, namely the thought of implementing a gold currency system as
a substitute for paper currency. (which was driven by Dr. Umar Vadillo and the Hisbut Tahrir
activist group) as happened / used during the Abbasid reign, namely the dinar and dirham
(gold and silver) currencies.
However, their thoughts cannot be included in a separate school of thought because they
are relative It is still premature and has not been supported by theoretical foundations and
empirical tests in the context of modern life. Moreover, in economic practice in the field it is
over valued so that instead a currency made of copper called "fulus" was created. Ibn
Taymiyah said: "There is no problem with money not coming from gold and silver as long as
the government is able to maintain its value". Al-Maghribi stated: "If the government prints
money continuously, it means that the government does not maintain the value of the
currency". In another section Ibn Qayyim warned: "If the government continuously prints
money, it can cause usury khafi (hidden usury) in the community, namely usury framed by
buying and selling transactions". This is in accordance with the meaning of the Hadith of the
Prophet, namely "There will come a time when people legalize usury by means of buying
and selling".
Muhammad Nejatullah Siddiqi in his book "Reading in Islamic Economic Thought"
explains the history of Islamic economic thought in four phases, namely:
Phase I: 113 H-451 H/731 M- 1058 M.
Phase II: 450 H-850 H / 1058 M-1446 M.
Phase III: 850 H-1350 H / 1446 M-1932 M.
Phase IV: 1932 AD-present.
In the first phase, it is known that there were 15 Muslim economists who actually
contributed to the development of economic thought, while at the same time there were no
economists from mainland Europe. Known at that time figures such as Abu Yusuf,
Muhammad bin Hasan al-Ahaibani, Harist bin Asan al-Muhadibi, Zaid bin Ali Zainal Abidin
bin Hussein bin Ali bin Abi Talib, Junaid Baghdadi, Ibn Miskawaih, Mawardi, etc.
The discourse that developed at that time was macroeconomic thinking concerning
fiscal policy and state finances as reported in Abu Yusuf's book of Al- Kharaj, which is a
book that is written by Abu Yusuf explains the mechanism for imposing taxes on land. Then
also Abu Ubaid in the book Al-Amwal describes how the management of state finances and
the state budget. In the book Al-Ahkam Al-Sulthaniyah by Mawardi discusses more about the
problem of government administration. And by other Islamic economic thinkers have also
been touched on the operation of unfair market mechanisms.
In the second phase of the development of Islamic economic thought, the discourse on
economics intensively began to develop even though on the other hand it was characterized
by changes in the structure of Islamic power which was getting wider. Several major figures
came to the fore such as Imam Al-Ghozali, Ibn Taymiyah, Ibn Khaldun, Ibn Qayyim. In this
second phase, the scientific discourse was directed more towards microeconomic analysis and
the function of money.
Imam Al-Ghozali addressed the issue of money and its functions. According to Imam
Al-Ghazali, it is not a problem to apply a non-gold and silver currency as long as the
government is able to maintain the stability of the currency as a legal tender. In one of his
writings he said "Money is like a mirror, colorless but can reflect all colors" and he also said
"If money has been traded, then it is the same as imprisoning the function of money", so that if
that happens it will cause depreciation of the currency exchange rate against other currencies.
He also explained about the prohibition of usury fadhl and its impact on the economy. Al-
Ghozali's intensive economic studies also touched on the issue of scales, price control (market
intervention), determination of taxes in an emergency, etc. In some parts of his thought also
touches on how the market mechanism works through the power of demand and supply.
(supply) in determining the market equilibrium.
An example of how to overcome the impact of price increases in order to stabilize
market prices is reflected in the government of Umar bin Khatab when there was inflation
caused by crop failure in the Hijaz area as the center of wheat production. The policy applied
by the government at that time to overcome it was through the market mechanism by
increasing the supply of wheat imported from Fuztadz Egypt so that prices returned to normal.
Conversely, if inflation is caused by market distortions such as monopolistic practices
and market hoarding, then the solution applied is not not by using the market mechanism but
through government intervention. Ibn Taymiyah has long suggested that the government
needs to conduct price intervention at the original equilibrium price to break the behavior of
monopolists and hoarding of goods. In contrast to government intervention, the views of
conventional economists suggest that Price fixing is done at the ceiling price or at the floor
price. Then what about the Prophet's hadith regarding the issue of price increases in Medina at
that time, namely "Allah is the one who determines prices. It is Allah who determines
provision and it is Allah who withholds provision". Apparently it was this hadith that later
inspired some economists to conceptualize the operation of the market mechanism by the
invisible hand. If so, is the proposition put forward by Ibn Taymiyyah regarding price
intervention contrary to the intent of the Prophet's hadith above? The answer is no! because
the direction and purpose of government intervention is so that the equilibrium price in the
market returns to the initial equilibrium position (equilibrium).
The third phase was a period of the rise of European civilization. At that time, 22
economists emerged while at the same time there were only a few Muslim scholars, namely
the Shah of Islam waliAllah with his work Hujjah Allah Al-Balighah which explains how the
provisions of sharia in relation to the behavior of an individual and the arrangement of social
organizations, other scholars are Muhammad Iqbal and Jamaluddin Al- Afghani.
We are familiar with the famous European economists such as JS Mill, Alfred Marshal
who formed the classical capitalist school. Behind them came the names of Karl Marx, Lenin
who gave birth to the socialist school. Then came JM Keynes with his Neo Classical school.
In this phase, economic thought from the West really dominated the world until now.
Meanwhile, Muslim scholars continue to experience moral and intellectual decline so that
most Islamic countries become colonies of western countries.
The fourth phase was characterized by the emergence of a new consciousness among
Muslims. A moral and intellectual awakening among Muslims gave birth to several names
such as Sayyid Qutb, Al- Maududi and Yusuf Qardhawi. However, his thoughts are more
inclined to the approach of fiqh, including the work of scientist Abu al- A'la al-Maududi from
Pakistan. It was not until a decade later that scientific works on Islamic economics began to
appear, especially after the first world conference of Muslims in Mecca in 1976 with the main
theme of Islamic economics (Qardhawi, 1997: 20-21).
Like a sleeping person, the study of Islamic economics as a science at the end of the
1970s was like stumbling awake, and this awakening seems to be related to the trends that
occurred in the world due to the economic crisis of 1974, with the birth of what is called the
flow or monetarist thinking, which further consensus Keynesian began to be abandoned
because it was considered no longer able to overcome the problems of contemporary
economics, this tendency is getting stronger after the collapse of Russia's socialist-communist
economy.
From 1980 until now, the awareness of Muslim thought developed quite rapidly, marked
by the emergence of three schools of Muslim thought, namely the Baqir As-Sadr school
(iqtishoduna), the mainstream school and the alternative school. In this phase, several
prominent names emerged such as MA. Mannan, Annas Zarka, Khurshid Ahmad, Nejatullah
Siddiqi, Hasanus Zaman, etc.
From research conducted by Umer Chapra, for example, it can be seen that the capitalist
economic system that relies on market mechanisms has failed to realize its goals, both
positive goals and normative goals.3 Similar failures achieving 'efficient and fair' economic
activity in the process of allocation and distribution of limited resources. While normative
goals are universal goals based on certain norms from all socio-economic aspects such as fair
income distribution, optimal growth rates etc. that are structured based on religious norms
also experienced by the socialist economic system. Actually, the purpose of the socialist
economic system is to correct various problems found in the capitalist economic system, so
that one of the goals of this socialist economic system is the creation of shared prosperity,
where with the implementation of the system there will no longer be various social classes in
society, economic equality occurs, and society will be free from all kinds of tyranny. This
goal turned out to be a failure, because the designers of the system did not understand what
human beings really meant. In this system, people were treated as cogs in a machine called
the state rather than a system built on the spontaneous and voluntary interactions of individual
economic actors.
Therefore, the development of Islamic economics as an alternative system is very
necessary, and with this alternative economic system the goal of economic activity to achieve
maqosidus shar'iah, which is an effort to improve the quality of economic activity to improve
the welfare of all human beings can be realized. The religious moral element is thus part of
the Islamic economic theory itself, and the Islamic economic mechanism to achieve prosperity
efficiently is built through the values of justice, equity and the development of the fiscal
sector in encouraging economic dynamics.
Conclusion
The above quote shows that Islamic economic thought in classical times was very
advanced and developed before Western scientists discussed it in the 18th-19th centuries. This
fact must be considered by contemporary economists, not only Muslim economists but also
non-Muslim economists around the world. Contribution of Islamic Economics to Modern
Economics In the past three decades, the study and research of Islamic economics has
flourished again. Various international forums on Islamic economics have been held
frequently and widely in various countries, such as conferences seminars, symposiums and
workshops. Dozens of doctors and professors of Islamic economics who are experts in both
conventional and shari'ah economics, appear as speakers in these forums. From their study,
they found that Islamic economic theory is actually not a new science or a science that is
fundamentally derived from modern economic theory that is developing today. Historical
facts show that classical Islamic scientists are the inventors and founders of all scientific
fields, including economics.
Circumstances in each period
There were several circumstances that resulted in the period of khulafa' al- rashidun not
many economists were born, including (1) Al Quran and al Hadith become the main source in
running people's lives. (2) The dominance of policy is more influenced by the attitude of the
leader as a representation of the successor to the Prophet Muhammad. This makes the caliph's
decision a reference in carrying out activities in the social field. (3) The scientific capacity of
each caliph is not the same, the period of leadership of the caliph is relatively different and the
end of his power 3 caliphs ended in political tragedy;. Abu Bakar's caliphate lasted for 2
years, 3 months, 11 days. Umar bin Khattab held the caliphate for 10 years, 6 months, 5 days.
Usman bin Affan ruled for 12 years less 12 days, and Ali bin Abi Talib ruled for 5 years and 3
months (Ahmad, 2000:12). (4) There has not been much friction thought with the Byzantine
(Greek) and Sasanian (Persian) scientific mainstream, because the mastery of Greece and
Persia has not yet reached the process of assimilating scientific potential (see Hodgson, 1999:
287).
While there were not many Muslim thinkers in the field of economics during the
Ummayah dynasty due to, among others; (1) The leader's busyness in expanding new
territories which was quite labor and time consuming. (2) The government system tended to
be Arab-centric, the Arab style was very dominant in the bureaucratic system during the
Ummayah dynasty. Non-Arabs - consisting of Persian descendants - commonly called mawali
were treated as second-class citizens. This situation affected the dialectic between the
bureaucracy and the Persians, in fact, as the more educated people were not so good. (3)
Geographically, Damascus, the capital of the Ummayah dynasty consisted mostly of Arabs, so
it was far from the interaction of the outside world, in contrast to Bagdad, the capital of the
Abbasid dynasty, which was close to Cteshipon, the former capital of the Sassanid empire,
Persia. (see Saefudin, 2002: 30-31)
While progress Islamic thought at period dynasty Abbasid dynasty was caused by; (1)
The contact between Islam and Persia became the development of science and philosophy
because Persia culturally played a major role in the development of the Greek scientific
tradition. (2) There was a great deal of activity in translating Greek literature into Arabic.
According to Mehdi Nakosteen, the translation movement was influenced by the previous
translation movement carried out during the Sassanid Empire, which was centered at the
Jundishapur Academy. This academy was the center for translating Greek and Hindu works of
science and philosophy into Pahlavi. From this school also came some important translations
from Sanskrit, Pahlavi and Syriac into Arabic. (Nakosteen, 1964:33) (3) The relative absence
of territorial clearances and rebellions ensured the stability of the government so that the
government's concentration on promoting intellectual aspects found opportunities. (4) The
existence of heterogeneous civilizations and cultures in Baghdad led to a process of
interaction between one culture and another; Arab, Greek, Persian, and Hindu which had an
impact on intellectual development. Bagdad was also inhabited by the rest of the population
native Chaldaeans and Suryani. (5) Bagdad was considered strategic and profitable because it
was passed by the Tigris and Euphrates rivers. (Saefuddin, 2002: 149) Goods can go in and
out through the river using boats so that Bagdad becomes a bustling economic satellite with
commodities being traded.
Then, the science of economics during the Ummayah or Abbasid era is certainly not as
familiar today. From the above historical developments we can note that (1) Economics is an
integral part of the political, social and cultural life of Islamic society so that economic
thought in the work of Muslim thinkers is difficult to separate from political and cultural
thought. This can be proven by the number of books written by Muslim thinkers who unite
economic problems with social, political and cultural problems. (2) Muslim thinkers are
known as Muslim economists because they have documented works through written works
that can be accessed by generations after him, and or known because there are students of the
Muslim thinker who documented his economic his economic thought. (3) Every Muslim
thinker expresses economic or social, political and cultural issues influenced by the
background of each Muslim thinker's life; residence, country, occupation and others.
The development of Muslim economic thought in Europe
The development of knowledge in the Islamic world influenced the progress of thought
in the European world. The influence to Europe is through several ways as follows:
Travels.
During the 11th and early centuries 12 Several Latin-Scholastic European scholars traveled in
several Arab countries to learn Arabic in order to gain knowledge to bring back to Europe.
During this period many students from Italy, Spain and Southern France attended Muslim
studies to learn mathematics, philosophy, medicine, cosmography, and mathematics other
studies in order to be able to teach in Western universities-which were established after the
studies in the Muslim world (Sharif, 1966:1367).
Translation.
From the 11th to the 14th century, there was a great deal of translation from Arabic to
Latin, not only of Arabic writing, but from Arabic to Hebrew. This was done in Spain, Italy
and France. Some notable translators are known from medieval history such as Adelard of
Bath, Constantine the African, Michael the Sct, Herman the German, Dominic Gundisilavi,
John of Seville, Plato of Trivoli, William of Luna, Gerard of Cremona, and Aflred of Sareshel
(Durant, 1950:910) According to Crombie during the Middle Ages, the translation of Arabic
into Latin was a major undertaking 14th and 15th centuries, Scholastic Europe was also not
directly influenced by the legacy of European thinkers, they still used the knowledge of
Muslim thinkers (see Crombie, 1963: 30).
Oral Tradition
Other important influential sources in the oral tradition are insufficiently available.
According to Chejne that specifically for Oral tradition is an important factor, and this is
evidenced by the literary relationship between the Arabs and the West. According to Chejne,
oral transmission took place over a long period of time and relations were maintained between
Muslims and Christians by being bilingual in Spanish. (see Chejne, 1980:111)
Trade
Some authors point out that trade brought the Arab world through Russian roads to
Polania, the Baltic, Scadinavia, central-western Europe and Iceland. Through trade resulting
in the spread of economic institutions, Arab money was used in the Christian Kingdom of the
North, where there had been no coins for 400 years. (see Hitti, 1943:144)
Diffusion and Institutions
Udovich reports that by the 15th century, there were already various contracts of trust
and partnership between Venetians and Arab merchants in Alexandria. These contractual
forms originated in the Islamic world and eventually spread in Latin Europe through contact
with Muslim scholars and scholars legal experts. Then, the emergence of various forms of
instruments and institutions facilitating the development of commerce and trade in Europe,
such as bills of exchange (siftajah), letters of credit (hawala), specialized trading centers
(funduq) and private banks (ma'una) (see Kramers, 1934:102).
Crusades
The crusades that took place from 1092 to 1292 were a long time for Europe to use to
gain knowledge from the Islamic world. According to Ferruollo, during this period the
Muslim community helped shape European attitudes, feelings and values (see Ferruollo,
1984: 42).
Why Europeans do not recognize that Islamic science is big enough to influence the
development of science in Europe, because (1) Europe in medieval times was known to be
very hostile to the Islamic world. This made it difficult for Europeans to accept the
advantages that had been obtained by the Muslim community (Ghanzanfar, 2002:153); and
(2) Scholars at that time borrowing without telling was a common practice, besides property
rights in the 12th century were not yet recognized. In this regard, the Spanish-era priest of the
Domician order, Raymund Martin - who influenced St. Thomas Aquinas - is known to have
sourced his book Pugio Fidei from al Ghazali's Tahafut al-Falasifa, Maqasid ul-Falasifa, al-
Munqid, Mishkat ul-Anwar, and Ihya Ulumuddin, without citing the references (see Sharif,
1966: 1361)).
If traced further, let alone listen back to how the development of Muslim thought about
Islamic economics that already exists (the author described above) which can be traced since
the life of the Prophet Muhammad SAW. Adam Smith was named the father of modern
economics along with the launch of economic thought in a book entitled 'An Inquiry into the
nature causes the wealth of nations'. From Smith's thought, a tradition of scientific thought
was born Classical economics emphasizes the freedom of market mechanisms in measuring
economic activity (laises faire) without being disturbed by government policies.
Adam Smith gave an example of an economically backward society is the Indians in
North America. While an example of an advanced economic society is the Arabs. The Arabs
Adam Smith meant were certainly a nation of traders in the days of the Prophet. Because in
the next explanation he said that the nation led by Muhammad and the generations after him.
From Adam Smith's explanation, it is clear that he recognized the superiority and
greatness of the Muslim economy in the past. Therefore, it is likely that he has indirectly
adopted Islamic economic theories. The indication shows that the progress of the Islamic
economy in medieval times was felt in England, Adam Smith's homeland, even long before he
was born. In 774 AD, King Offa in England at that time minted gold coins which were a
direct copy of the Islamic dinar, including its Arabic writing. All The writing on the coin is
Arabic, except on one side it says OFFAREX.
This reality shows that the Islamic dinar was then the strongest currency in the world. In
addition, the Muslim economy was far more advanced than Europe. It showed that Muslim
international trade had reached as far as Northern Europe. In 1764, Adam Smith gave up his
professorship in Glasgow England and chose his new career as economic advisor to the Duke
of Buccleuch. It was during this period that Smith traveled extensively abroad, especially to
France. Here he met many famous philosophers. Smith began writing The Wealth of Nations
while he was in France and completed it in 1766, in Kirdcaldy. And ten years later it was
published, namely in 1776. At that time in Europe there were already translated books by
Muslim economists. In fact, in the South of France, many professors were applying the
teaching patterns they had learned from Muslim countries. The explanation above shows that
the role of Muslim scientists is very significant to the rise of European intellectualism,
including in economic thought.
In the next development of classical economic thought was not always able to solve all
the economic problems that are growing increasingly complex, one proof is the emergence of
a severe depression of the world economy ahead of World War II (malaise period). From here
then inspired the birth of economic thought that emphasizes the need for the role of
government in regulating economic activity. This thinking was pioneered by John Maynard
Keynes who is considered a modern economic figure who developed the idea of short-term
economic analysis to encourage economic growth and overcome the problems of
unemployment and inflation.
Contemporary Islamic economic thought can be categorized into three groups of schools
of thought, namely:
Baqir As-Sadr's School
Mainstream Mazhab
Alternative Mazhab
Baqir As-Sadr's School
Scholars who became pioneers of this school are Baqir as- Sadr and Ali Shariati and
scholars from Iran and Iraq. According to As-Sadr's thinking that in studying economics must
be seen from two aspects, namely aspects of philosophy of economics or normative economics
and aspects of positive economics. An example of positive economics, i.e. studying the theory
of consumption and demand which is a common and acceptable phenomenon by anyone
without being influenced by idiology. Meanwhile, from the aspect of phylosophy of
economics which is the result of human thought, it will be found that each human group has
an idiology, a perspective that is not the same. An example is the discussion of 'justice'.
According to the concept of classical capitalism, what is meant by fairness is that you get
what you deserve, meaning 'you get what you have worked for'. Meanwhile, according to
classical socialism, the meaning of 'fair' is that no one has previlege to get more than others,
meaning that no one gets facilities to get more than others, in other words, everyone gets the
same. But Islam has its own meaning in interpreting 'fair' which is laa tadhlimuuna wa laa
tudhlamuuna meaning not to harm each other. So according to Baqir As-sadr's school of
thought, there is a difference in principle between economics and Islamic ideology, Therefore,
there will never be a common ground between Islam and economics.
Economics states that economic problems arise because of the problem of scarcity of
economic resources (scarcity) compared to human needs which are unlimited. In this case, the
school of Baqir As-Sadr rejects the understanding of economic science because in Islam it has
been confirmed that Allah Swt. has created creatures in this world including humans in the
sufficiency of economic resources as stated in His word:1
َ
َقَلَخَ
وََ
لُكَََ
فٍَءْيَش-َ
ُهَر دَقَََت-َْ
يِدْق-اًر
"...........................................................
.......... And He has created all things, and He has measured them out with precision."
Furthermore, according to the school of Baqir As-Sadr, the main problem faced by all
human beings in this world is the problem of unequal distribution of wealth. How the gift
given by Allah SWT to all creatures including humans can be distributed evenly and
proportionally. According to the school of Baqir As-Sadr to realize this, there are several
steps taken, namely:
replacing the term economics with the term iqtishad which implies that it is harmonious,
equal, and balanced (in between).
compile and reconstruct a separate economic science derived from the Qur'an and
Assunnah.
This is the contribution of Baqir As-sadr's school which is quite significant in the
discourse of the development of Islamic economics.
Mainstream Mazhab
Islamic economic thought from the mainstream school of thought is what gives the most
color in the discourse of Islamic economics now because most of its figures from the Islamic
Development Bank (IDB) which has funding facilities and cooperation networks with various
international institutions. The figures of the mainstream school include M. Umer Chapra, M.
A. Mannan, Nejatullah Siddiqi, Khurshid Ahmad, Monzer Kahf etc. equilibrium. But
relatively at a certain time and in a certain place there will still be a problem of scarcity. So
until here there is no difference between conventional economics and Islamic economics. The
difference is only in the mechanism of solving economic problems that according to the
mainstream school must refer to the Qur'an and Assunnah. While in the view of classical
capitalism the solution through the operation of the market mechanism, and classical
socialism through a centralized planning system.
Alternative Mazhab
In contrast to the views of the two previous schools, the alternative school sees that
Baqir as-Sadr's school of thought tries to explore and find a new Islamic economic paradigm
by leaving the conventional economic paradigm. While the mainstream school is considered
to be another face of the neoclassical view by eliminating the element of interest and adding
zakat.
The alternative school led by Prof. Timjur Kura (Chair of the Economics Department at
the University of Southern California), Prof. Jomo and Prof. Muhammad Arief contributes
through critical analysis of economics not only on the views of capitalism and socialism but
also criticizes the development of economic discourse. Islamic economic discourse. They
Islam is a view or ideology that is absolute truth that talks about Islamic economics means
studying human thinking about the verses of God and the sunnah of the Prophet in the
economic aspect. So according to this alternative school of Islamic economics is a
discourse that can still be debated because it is a human interpretation of the Qur'an
and Assunnah that needs to be tested and studied continuously.
Actually there is still one more Islamic economic discourse that is also beginning to
develop in the Islamic world, namely the thought of implementing a gold currency system as
a substitute for paper currency. (which was driven by Dr. Umar Vadillo and the Hisbut Tahrir
activist group) as happened / used during the Abbasid reign, namely the dinar and dirham
(gold and silver) currencies.
However, their thoughts cannot be included in a separate school of thought because they
are relative It is still premature and has not been supported by theoretical foundations and
empirical tests in the context of modern life. Moreover, in economic practice in the field it is
over valued so that instead a currency made of copper called "fulus" was created. Ibn
Taymiyah said: "There is no problem with money not coming from gold and silver as long as
the government is able to maintain its value". Al-Maghribi stated: "If the government prints
money continuously, it means that the government does not maintain the value of the
currency". In another section Ibn Qayyim warned: "If the government continuously prints
money, it can cause usury khafi (hidden usury) in the community, namely usury framed by
buying and selling transactions". This is in accordance with the meaning of the Hadith of the
Prophet, namely "There will come a time when people legalize usury by means of buying
and selling".
Muhammad Nejatullah Siddiqi in his book "Reading in Islamic Economic Thought"
explains the history of Islamic economic thought in four phases, namely:
Phase I: 113 H-451 H/731 M- 1058 M.
Phase II: 450 H-850 H / 1058 M-1446 M.
Phase III: 850 H-1350 H / 1446 M-1932 M.
Phase IV: 1932 AD-present.
In the first phase, it is known that there were 15 Muslim economists who actually
contributed to the development of economic thought, while at the same time there were no
economists from mainland Europe. Known at that time figures such as Abu Yusuf,
Muhammad bin Hasan al-Ahaibani, Harist bin Asan al-Muhadibi, Zaid bin Ali Zainal Abidin
bin Hussein bin Ali bin Abi Talib, Junaid Baghdadi, Ibn Miskawaih, Mawardi, etc.
The discourse that developed at that time was macroeconomic thinking concerning
fiscal policy and state finances as reported in Abu Yusuf's book of Al- Kharaj, which is a
book that is written by Abu Yusuf explains the mechanism for imposing taxes on land. Then
also Abu Ubaid in the book Al-Amwal describes how the management of state finances and
the state budget. In the book Al-Ahkam Al-Sulthaniyah by Mawardi discusses more about the
problem of government administration. And by other Islamic economic thinkers have also
been touched on the operation of unfair market mechanisms.
In the second phase of the development of Islamic economic thought, the discourse on
economics intensively began to develop even though on the other hand it was characterized
by changes in the structure of Islamic power which was getting wider. Several major figures
came to the fore such as Imam Al-Ghozali, Ibn Taymiyah, Ibn Khaldun, Ibn Qayyim. In this
second phase, the scientific discourse was directed more towards microeconomic analysis and
the function of money.
Imam Al-Ghozali addressed the issue of money and its functions. According to Imam
Al-Ghazali, it is not a problem to apply a non-gold and silver currency as long as the
government is able to maintain the stability of the currency as a legal tender. In one of his
writings he said "Money is like a mirror, colorless but can reflect all colors" and he also said
"If money has been traded, then it is the same as imprisoning the function of money", so that if
that happens it will cause depreciation of the currency exchange rate against other currencies.
He also explained about the prohibition of usury fadhl and its impact on the economy. Al-
Ghozali's intensive economic studies also touched on the issue of scales, price control (market
intervention), determination of taxes in an emergency, etc. In some parts of his thought also
touches on how the market mechanism works through the power of demand and supply.
(supply) in determining the market equilibrium.
An example of how to overcome the impact of price increases in order to stabilize
market prices is reflected in the government of Umar bin Khatab when there was inflation
caused by crop failure in the Hijaz area as the center of wheat production. The policy applied
by the government at that time to overcome it was through the market mechanism by
increasing the supply of wheat imported from Fuztadz Egypt so that prices returned to normal.
Conversely, if inflation is caused by market distortions such as monopolistic practices
and market hoarding, then the solution applied is not not by using the market mechanism but
through government intervention. Ibn Taymiyah has long suggested that the government
needs to conduct price intervention at the original equilibrium price to break the behavior of
monopolists and hoarding of goods. In contrast to government intervention, the views of
conventional economists suggest that Price fixing is done at the ceiling price or at the floor
price. Then what about the Prophet's hadith regarding the issue of price increases in Medina at
that time, namely "Allah is the one who determines prices. It is Allah who determines
provision and it is Allah who withholds provision". Apparently it was this hadith that later
inspired some economists to conceptualize the operation of the market mechanism by the
invisible hand. If so, is the proposition put forward by Ibn Taymiyyah regarding price
intervention contrary to the intent of the Prophet's hadith above? The answer is no! because
the direction and purpose of government intervention is so that the equilibrium price in the
market returns to the initial equilibrium position (equilibrium).
The third phase was a period of the rise of European civilization. At that time, 22
economists emerged while at the same time there were only a few Muslim scholars, namely
the Shah of Islam waliAllah with his work Hujjah Allah Al-Balighah which explains how the
provisions of sharia in relation to the behavior of an individual and the arrangement of social
organizations, other scholars are Muhammad Iqbal and Jamaluddin Al- Afghani.
We are familiar with the famous European economists such as JS Mill, Alfred Marshal
who formed the classical capitalist school. Behind them came the names of Karl Marx, Lenin
who gave birth to the socialist school. Then came JM Keynes with his Neo Classical school.
In this phase, economic thought from the West really dominated the world until now.
Meanwhile, Muslim scholars continue to experience moral and intellectual decline so that
most Islamic countries become colonies of western countries.
The fourth phase was characterized by the emergence of a new consciousness among
Muslims. A moral and intellectual awakening among Muslims gave birth to several names
such as Sayyid Qutb, Al- Maududi and Yusuf Qardhawi. However, his thoughts are more
inclined to the approach of fiqh, including the work of scientist Abu al- A'la al-Maududi from
Pakistan. It was not until a decade later that scientific works on Islamic economics began to
appear, especially after the first world conference of Muslims in Mecca in 1976 with the main
theme of Islamic economics (Qardhawi, 1997: 20-21).
Like a sleeping person, the study of Islamic economics as a science at the end of the
1970s was like stumbling awake, and this awakening seems to be related to the trends that
occurred in the world due to the economic crisis of 1974, with the birth of what is called the
flow or monetarist thinking, which further consensus Keynesian began to be abandoned
because it was considered no longer able to overcome the problems of contemporary
economics, this tendency is getting stronger after the collapse of Russia's socialist-communist
economy.
From 1980 until now, the awareness of Muslim thought developed quite rapidly, marked
by the emergence of three schools of Muslim thought, namely the Baqir As-Sadr school
(iqtishoduna), the mainstream school and the alternative school. In this phase, several
prominent names emerged such as MA. Mannan, Annas Zarka, Khurshid Ahmad, Nejatullah
Siddiqi, Hasanus Zaman, etc.
From research conducted by Umer Chapra, for example, it can be seen that the capitalist
economic system that relies on market mechanisms has failed to realize its goals, both
positive goals and normative goals.3 Similar failures achieving 'efficient and fair' economic
activity in the process of allocation and distribution of limited resources. While normative
goals are universal goals based on certain norms from all socio-economic aspects such as fair
income distribution, optimal growth rates etc. that are structured based on religious norms
also experienced by the socialist economic system. Actually, the purpose of the socialist
economic system is to correct various problems found in the capitalist economic system, so
that one of the goals of this socialist economic system is the creation of shared prosperity,
where with the implementation of the system there will no longer be various social classes in
society, economic equality occurs, and society will be free from all kinds of tyranny. This
goal turned out to be a failure, because the designers of the system did not understand what
human beings really meant. In this system, people were treated as cogs in a machine called
the state rather than a system built on the spontaneous and voluntary interactions of individual
economic actors.
Therefore, the development of Islamic economics as an alternative system is very
necessary, and with this alternative economic system the goal of economic activity to achieve
maqosidus shar'iah, which is an effort to improve the quality of economic activity to improve
the welfare of all human beings can be realized. The religious moral element is thus part of
the Islamic economic theory itself, and the Islamic economic mechanism to achieve prosperity
efficiently is built through the values of justice, equity and the development of the fiscal
sector in encouraging economic dynamics.
Conclusion
The above quote shows that Islamic economic thought in classical times was very
advanced and developed before Western scientists discussed it in the 18th-19th centuries. This
fact must be considered by contemporary economists, not only Muslim economists but also
non-Muslim economists around the world. Contribution of Islamic Economics to Modern
Economics In the past three decades, the study and research of Islamic economics has
flourished again. Various international forums on Islamic economics have been held
frequently and widely in various countries, such as conferences seminars, symposiums and
workshops. Dozens of doctors and professors of Islamic economics who are experts in both
conventional and shari'ah economics, appear as speakers in these forums. From their study,
they found that Islamic economic theory is actually not a new science or a science that is
fundamentally derived from modern economic theory that is developing today. Historical
facts show that classical Islamic scientists are the inventors and founders of all scientific
fields, including economics.
Circumstances in each period
There were several circumstances that resulted in the period of khulafa' al- rashidun not
many economists were born, including (1) Al Quran and al Hadith become the main source in
running people's lives. (2) The dominance of policy is more influenced by the attitude of the
leader as a representation of the successor to the Prophet Muhammad. This makes the caliph's
decision a reference in carrying out activities in the social field. (3) The scientific capacity of
each caliph is not the same, the period of leadership of the caliph is relatively different and the
end of his power 3 caliphs ended in political tragedy;. Abu Bakar's caliphate lasted for 2
years, 3 months, 11 days. Umar bin Khattab held the caliphate for 10 years, 6 months, 5 days.
Usman bin Affan ruled for 12 years less 12 days, and Ali bin Abi Talib ruled for 5 years and 3
months (Ahmad, 2000:12). (4) There has not been much friction thought with the Byzantine
(Greek) and Sasanian (Persian) scientific mainstream, because the mastery of Greece and
Persia has not yet reached the process of assimilating scientific potential (see Hodgson, 1999:
287).
While there were not many Muslim thinkers in the field of economics during the
Ummayah dynasty due to, among others; (1) The leader's busyness in expanding new
territories which was quite labor and time consuming. (2) The government system tended to
be Arab-centric, the Arab style was very dominant in the bureaucratic system during the
Ummayah dynasty. Non-Arabs - consisting of Persian descendants - commonly called mawali
were treated as second-class citizens. This situation affected the dialectic between the
bureaucracy and the Persians, in fact, as the more educated people were not so good. (3)
Geographically, Damascus, the capital of the Ummayah dynasty consisted mostly of Arabs, so
it was far from the interaction of the outside world, in contrast to Bagdad, the capital of the
Abbasid dynasty, which was close to Cteshipon, the former capital of the Sassanid empire,
Persia. (see Saefudin, 2002: 30-31)
While progress Islamic thought at period dynasty Abbasid dynasty was caused by; (1)
The contact between Islam and Persia became the development of science and philosophy
because Persia culturally played a major role in the development of the Greek scientific
tradition. (2) There was a great deal of activity in translating Greek literature into Arabic.
According to Mehdi Nakosteen, the translation movement was influenced by the previous
translation movement carried out during the Sassanid Empire, which was centered at the
Jundishapur Academy. This academy was the center for translating Greek and Hindu works of
science and philosophy into Pahlavi. From this school also came some important translations
from Sanskrit, Pahlavi and Syriac into Arabic. (Nakosteen, 1964:33) (3) The relative absence
of territorial clearances and rebellions ensured the stability of the government so that the
government's concentration on promoting intellectual aspects found opportunities. (4) The
existence of heterogeneous civilizations and cultures in Baghdad led to a process of
interaction between one culture and another; Arab, Greek, Persian, and Hindu which had an
impact on intellectual development. Bagdad was also inhabited by the rest of the population
native Chaldaeans and Suryani. (5) Bagdad was considered strategic and profitable because it
was passed by the Tigris and Euphrates rivers. (Saefuddin, 2002: 149) Goods can go in and
out through the river using boats so that Bagdad becomes a bustling economic satellite with
commodities being traded.
Then, the science of economics during the Ummayah or Abbasid era is certainly not as
familiar today. From the above historical developments we can note that (1) Economics is an
integral part of the political, social and cultural life of Islamic society so that economic
thought in the work of Muslim thinkers is difficult to separate from political and cultural
thought. This can be proven by the number of books written by Muslim thinkers who unite
economic problems with social, political and cultural problems. (2) Muslim thinkers are
known as Muslim economists because they have documented works through written works
that can be accessed by generations after him, and or known because there are students of the
Muslim thinker who documented his economic his economic thought. (3) Every Muslim
thinker expresses economic or social, political and cultural issues influenced by the
background of each Muslim thinker's life; residence, country, occupation and others.
The development of Muslim economic thought in Europe
The development of knowledge in the Islamic world influenced the progress of thought
in the European world. The influence to Europe is through several ways as follows:
Travels.
During the 11th and early centuries 12 Several Latin-Scholastic European scholars traveled in
several Arab countries to learn Arabic in order to gain knowledge to bring back to Europe.
During this period many students from Italy, Spain and Southern France attended Muslim
studies to learn mathematics, philosophy, medicine, cosmography, and mathematics other
studies in order to be able to teach in Western universities-which were established after the
studies in the Muslim world (Sharif, 1966:1367).
Translation.
From the 11th to the 14th century, there was a great deal of translation from Arabic to
Latin, not only of Arabic writing, but from Arabic to Hebrew. This was done in Spain, Italy
and France. Some notable translators are known from medieval history such as Adelard of
Bath, Constantine the African, Michael the Sct, Herman the German, Dominic Gundisilavi,
John of Seville, Plato of Trivoli, William of Luna, Gerard of Cremona, and Aflred of Sareshel
(Durant, 1950:910) According to Crombie during the Middle Ages, the translation of Arabic
into Latin was a major undertaking 14th and 15th centuries, Scholastic Europe was also not
directly influenced by the legacy of European thinkers, they still used the knowledge of
Muslim thinkers (see Crombie, 1963: 30).
Oral Tradition
Other important influential sources in the oral tradition are insufficiently available.
According to Chejne that specifically for Oral tradition is an important factor, and this is
evidenced by the literary relationship between the Arabs and the West. According to Chejne,
oral transmission took place over a long period of time and relations were maintained between
Muslims and Christians by being bilingual in Spanish. (see Chejne, 1980:111)
Trade
Some authors point out that trade brought the Arab world through Russian roads to
Polania, the Baltic, Scadinavia, central-western Europe and Iceland. Through trade resulting
in the spread of economic institutions, Arab money was used in the Christian Kingdom of the
North, where there had been no coins for 400 years. (see Hitti, 1943:144)
Diffusion and Institutions
Udovich reports that by the 15th century, there were already various contracts of trust
and partnership between Venetians and Arab merchants in Alexandria. These contractual
forms originated in the Islamic world and eventually spread in Latin Europe through contact
with Muslim scholars and scholars legal experts. Then, the emergence of various forms of
instruments and institutions facilitating the development of commerce and trade in Europe,
such as bills of exchange (siftajah), letters of credit (hawala), specialized trading centers
(funduq) and private banks (ma'una) (see Kramers, 1934:102).
Crusades
The crusades that took place from 1092 to 1292 were a long time for Europe to use to
gain knowledge from the Islamic world. According to Ferruollo, during this period the
Muslim community helped shape European attitudes, feelings and values (see Ferruollo,
1984: 42).
Why Europeans do not recognize that Islamic science is big enough to influence the
development of science in Europe, because (1) Europe in medieval times was known to be
very hostile to the Islamic world. This made it difficult for Europeans to accept the
advantages that had been obtained by the Muslim community (Ghanzanfar, 2002:153); and
(2) Scholars at that time borrowing without telling was a common practice, besides property
rights in the 12th century were not yet recognized. In this regard, the Spanish-era priest of the
Domician order, Raymund Martin - who influenced St. Thomas Aquinas - is known to have
sourced his book Pugio Fidei from al Ghazali's Tahafut al-Falasifa, Maqasid ul-Falasifa, al-
Munqid, Mishkat ul-Anwar, and Ihya Ulumuddin, without citing the references (see Sharif,
1966: 1361)).
If traced further, let alone listen back to how the development of Muslim thought about
Islamic economics that already exists (the author described above) which can be traced since
the life of the Prophet Muhammad SAW. Adam Smith was named the father of modern
economics along with the launch of economic thought in a book entitled 'An Inquiry into the
nature causes the wealth of nations'. From Smith's thought, a tradition of scientific thought
was born Classical economics emphasizes the freedom of market mechanisms in measuring
economic activity (laises faire) without being disturbed by government policies.
Adam Smith gave an example of an economically backward society is the Indians in
North America. While an example of an advanced economic society is the Arabs. The Arabs
Adam Smith meant were certainly a nation of traders in the days of the Prophet. Because in
the next explanation he said that the nation led by Muhammad and the generations after him.
From Adam Smith's explanation, it is clear that he recognized the superiority and
greatness of the Muslim economy in the past. Therefore, it is likely that he has indirectly
adopted Islamic economic theories. The indication shows that the progress of the Islamic
economy in medieval times was felt in England, Adam Smith's homeland, even long before he
was born. In 774 AD, King Offa in England at that time minted gold coins which were a
direct copy of the Islamic dinar, including its Arabic writing. All The writing on the coin is
Arabic, except on one side it says OFFAREX.
This reality shows that the Islamic dinar was then the strongest currency in the world. In
addition, the Muslim economy was far more advanced than Europe. It showed that Muslim
international trade had reached as far as Northern Europe. In 1764, Adam Smith gave up his
professorship in Glasgow England and chose his new career as economic advisor to the Duke
of Buccleuch. It was during this period that Smith traveled extensively abroad, especially to
France. Here he met many famous philosophers. Smith began writing The Wealth of Nations
while he was in France and completed it in 1766, in Kirdcaldy. And ten years later it was
published, namely in 1776. At that time in Europe there were already translated books by
Muslim economists. In fact, in the South of France, many professors were applying the
teaching patterns they had learned from Muslim countries. The explanation above shows that
the role of Muslim scientists is very significant to the rise of European intellectualism,
including in economic thought.
In the next development of classical economic thought was not always able to solve all
the economic problems that are growing increasingly complex, one proof is the emergence of
a severe depression of the world economy ahead of World War II (malaise period). From here
then inspired the birth of economic thought that emphasizes the need for the role of
government in regulating economic activity. This thinking was pioneered by John Maynard
Keynes who is considered a modern economic figure who developed the idea of short-term
economic analysis to encourage economic growth and overcome the problems of
unemployment and inflation.
Contemporary Islamic economic thought can be categorized into three groups of schools
of thought, namely:
Baqir As-Sadr's School
Mainstream Mazhab
Alternative Mazhab
Baqir As-Sadr's School
Scholars who became pioneers of this school are Baqir as- Sadr and Ali Shariati and
scholars from Iran and Iraq. According to As-Sadr's thinking that in studying economics must
be seen from two aspects, namely aspects of philosophy of economics or normative economics
and aspects of positive economics. An example of positive economics, i.e. studying the theory
of consumption and demand which is a common and acceptable phenomenon by anyone
without being influenced by idiology. Meanwhile, from the aspect of phylosophy of
economics which is the result of human thought, it will be found that each human group has
an idiology, a perspective that is not the same. An example is the discussion of 'justice'.
According to the concept of classical capitalism, what is meant by fairness is that you get
what you deserve, meaning 'you get what you have worked for'. Meanwhile, according to
classical socialism, the meaning of 'fair' is that no one has previlege to get more than others,
meaning that no one gets facilities to get more than others, in other words, everyone gets the
same. But Islam has its own meaning in interpreting 'fair' which is laa tadhlimuuna wa laa
tudhlamuuna meaning not to harm each other. So according to Baqir As-sadr's school of
thought, there is a difference in principle between economics and Islamic ideology, Therefore,
there will never be a common ground between Islam and economics.
Economics states that economic problems arise because of the problem of scarcity of
economic resources (scarcity) compared to human needs which are unlimited. In this case, the
school of Baqir As-Sadr rejects the understanding of economic science because in Islam it has
been confirmed that Allah Swt. has created creatures in this world including humans in the
sufficiency of economic resources as stated in His word:1
َ
َقَلَخَ
وََ
لُكَََ
فٍَءْيَش-َ
ُهَر دَقَََت-َْ
يِدْق-اًر
"...........................................................
.......... And He has created all things, and He has measured them out with precision."
Furthermore, according to the school of Baqir As-Sadr, the main problem faced by all
human beings in this world is the problem of unequal distribution of wealth. How the gift
given by Allah SWT to all creatures including humans can be distributed evenly and
proportionally. According to the school of Baqir As-Sadr to realize this, there are several
steps taken, namely:
replacing the term economics with the term iqtishad which implies that it is harmonious,
equal, and balanced (in between).
compile and reconstruct a separate economic science derived from the Qur'an and
Assunnah.
This is the contribution of Baqir As-sadr's school which is quite significant in the
discourse of the development of Islamic economics.
Mainstream Mazhab
Islamic economic thought from the mainstream school of thought is what gives the most
color in the discourse of Islamic economics now because most of its figures from the Islamic
Development Bank (IDB) which has funding facilities and cooperation networks with various
international institutions. The figures of the mainstream school include M. Umer Chapra, M.
A. Mannan, Nejatullah Siddiqi, Khurshid Ahmad, Monzer Kahf etc. equilibrium. But
relatively at a certain time and in a certain place there will still be a problem of scarcity. So
until here there is no difference between conventional economics and Islamic economics. The
difference is only in the mechanism of solving economic problems that according to the
mainstream school must refer to the Qur'an and Assunnah. While in the view of classical
capitalism the solution through the operation of the market mechanism, and classical
socialism through a centralized planning system.
Alternative Mazhab
In contrast to the views of the two previous schools, the alternative school sees that
Baqir as-Sadr's school of thought tries to explore and find a new Islamic economic paradigm
by leaving the conventional economic paradigm. While the mainstream school is considered
to be another face of the neoclassical view by eliminating the element of interest and adding
zakat.
The alternative school led by Prof. Timjur Kura (Chair of the Economics Department at
the University of Southern California), Prof. Jomo and Prof. Muhammad Arief contributes
through critical analysis of economics not only on the views of capitalism and socialism but
also criticizes the development of economic discourse. Islamic economic discourse. They
Islam is a view or ideology that is absolute truth that talks about Islamic economics means
studying human thinking about the verses of God and the sunnah of the Prophet in the
economic aspect. So according to this alternative school of Islamic economics is a
discourse that can still be debated because it is a human interpretation of the Qur'an
and Assunnah that needs to be tested and studied continuously.
Actually there is still one more Islamic economic discourse that is also beginning to
develop in the Islamic world, namely the thought of implementing a gold currency system as
a substitute for paper currency. (which was driven by Dr. Umar Vadillo and the Hisbut Tahrir
activist group) as happened / used during the Abbasid reign, namely the dinar and dirham
(gold and silver) currencies.
However, their thoughts cannot be included in a separate school of thought because they
are relative It is still premature and has not been supported by theoretical foundations and
empirical tests in the context of modern life. Moreover, in economic practice in the field it is
over valued so that instead a currency made of copper called "fulus" was created. Ibn
Taymiyah said: "There is no problem with money not coming from gold and silver as long as
the government is able to maintain its value". Al-Maghribi stated: "If the government prints
money continuously, it means that the government does not maintain the value of the
currency". In another section Ibn Qayyim warned: "If the government continuously prints
money, it can cause usury khafi (hidden usury) in the community, namely usury framed by
buying and selling transactions". This is in accordance with the meaning of the Hadith of the
Prophet, namely "There will come a time when people legalize usury by means of buying
and selling".
Muhammad Nejatullah Siddiqi in his book "Reading in Islamic Economic Thought"
explains the history of Islamic economic thought in four phases, namely:
Phase I: 113 H-451 H/731 M- 1058 M.
Phase II: 450 H-850 H / 1058 M-1446 M.
Phase III: 850 H-1350 H / 1446 M-1932 M.
Phase IV: 1932 AD-present.
In the first phase, it is known that there were 15 Muslim economists who actually
contributed to the development of economic thought, while at the same time there were no
economists from mainland Europe. Known at that time figures such as Abu Yusuf,
Muhammad bin Hasan al-Ahaibani, Harist bin Asan al-Muhadibi, Zaid bin Ali Zainal Abidin
bin Hussein bin Ali bin Abi Talib, Junaid Baghdadi, Ibn Miskawaih, Mawardi, etc.
The discourse that developed at that time was macroeconomic thinking concerning
fiscal policy and state finances as reported in Abu Yusuf's book of Al- Kharaj, which is a
book that is written by Abu Yusuf explains the mechanism for imposing taxes on land. Then
also Abu Ubaid in the book Al-Amwal describes how the management of state finances and
the state budget. In the book Al-Ahkam Al-Sulthaniyah by Mawardi discusses more about the
problem of government administration. And by other Islamic economic thinkers have also
been touched on the operation of unfair market mechanisms.
In the second phase of the development of Islamic economic thought, the discourse on
economics intensively began to develop even though on the other hand it was characterized
by changes in the structure of Islamic power which was getting wider. Several major figures
came to the fore such as Imam Al-Ghozali, Ibn Taymiyah, Ibn Khaldun, Ibn Qayyim. In this
second phase, the scientific discourse was directed more towards microeconomic analysis and
the function of money.
Imam Al-Ghozali addressed the issue of money and its functions. According to Imam
Al-Ghazali, it is not a problem to apply a non-gold and silver currency as long as the
government is able to maintain the stability of the currency as a legal tender. In one of his
writings he said "Money is like a mirror, colorless but can reflect all colors" and he also said
"If money has been traded, then it is the same as imprisoning the function of money", so that if
that happens it will cause depreciation of the currency exchange rate against other currencies.
He also explained about the prohibition of usury fadhl and its impact on the economy. Al-
Ghozali's intensive economic studies also touched on the issue of scales, price control (market
intervention), determination of taxes in an emergency, etc. In some parts of his thought also
touches on how the market mechanism works through the power of demand and supply.
(supply) in determining the market equilibrium.
An example of how to overcome the impact of price increases in order to stabilize
market prices is reflected in the government of Umar bin Khatab when there was inflation
caused by crop failure in the Hijaz area as the center of wheat production. The policy applied
by the government at that time to overcome it was through the market mechanism by
increasing the supply of wheat imported from Fuztadz Egypt so that prices returned to normal.
Conversely, if inflation is caused by market distortions such as monopolistic practices
and market hoarding, then the solution applied is not not by using the market mechanism but
through government intervention. Ibn Taymiyah has long suggested that the government
needs to conduct price intervention at the original equilibrium price to break the behavior of
monopolists and hoarding of goods. In contrast to government intervention, the views of
conventional economists suggest that Price fixing is done at the ceiling price or at the floor
price. Then what about the Prophet's hadith regarding the issue of price increases in Medina at
that time, namely "Allah is the one who determines prices. It is Allah who determines
provision and it is Allah who withholds provision". Apparently it was this hadith that later
inspired some economists to conceptualize the operation of the market mechanism by the
invisible hand. If so, is the proposition put forward by Ibn Taymiyyah regarding price
intervention contrary to the intent of the Prophet's hadith above? The answer is no! because
the direction and purpose of government intervention is so that the equilibrium price in the
market returns to the initial equilibrium position (equilibrium).
The third phase was a period of the rise of European civilization. At that time, 22
economists emerged while at the same time there were only a few Muslim scholars, namely
the Shah of Islam waliAllah with his work Hujjah Allah Al-Balighah which explains how the
provisions of sharia in relation to the behavior of an individual and the arrangement of social
organizations, other scholars are Muhammad Iqbal and Jamaluddin Al- Afghani.
We are familiar with the famous European economists such as JS Mill, Alfred Marshal
who formed the classical capitalist school. Behind them came the names of Karl Marx, Lenin
who gave birth to the socialist school. Then came JM Keynes with his Neo Classical school.
In this phase, economic thought from the West really dominated the world until now.
Meanwhile, Muslim scholars continue to experience moral and intellectual decline so that
most Islamic countries become colonies of western countries.
The fourth phase was characterized by the emergence of a new consciousness among
Muslims. A moral and intellectual awakening among Muslims gave birth to several names
such as Sayyid Qutb, Al- Maududi and Yusuf Qardhawi. However, his thoughts are more
inclined to the approach of fiqh, including the work of scientist Abu al- A'la al-Maududi from
Pakistan. It was not until a decade later that scientific works on Islamic economics began to
appear, especially after the first world conference of Muslims in Mecca in 1976 with the main
theme of Islamic economics (Qardhawi, 1997: 20-21).
Like a sleeping person, the study of Islamic economics as a science at the end of the
1970s was like stumbling awake, and this awakening seems to be related to the trends that
occurred in the world due to the economic crisis of 1974, with the birth of what is called the
flow or monetarist thinking, which further consensus Keynesian began to be abandoned
because it was considered no longer able to overcome the problems of contemporary
economics, this tendency is getting stronger after the collapse of Russia's socialist-communist
economy.
From 1980 until now, the awareness of Muslim thought developed quite rapidly, marked
by the emergence of three schools of Muslim thought, namely the Baqir As-Sadr school
(iqtishoduna), the mainstream school and the alternative school. In this phase, several
prominent names emerged such as MA. Mannan, Annas Zarka, Khurshid Ahmad, Nejatullah
Siddiqi, Hasanus Zaman, etc.
From research conducted by Umer Chapra, for example, it can be seen that the capitalist
economic system that relies on market mechanisms has failed to realize its goals, both
positive goals and normative goals.3 Similar failures achieving 'efficient and fair' economic
activity in the process of allocation and distribution of limited resources. While normative
goals are universal goals based on certain norms from all socio-economic aspects such as fair
income distribution, optimal growth rates etc. that are structured based on religious norms
also experienced by the socialist economic system. Actually, the purpose of the socialist
economic system is to correct various problems found in the capitalist economic system, so
that one of the goals of this socialist economic system is the creation of shared prosperity,
where with the implementation of the system there will no longer be various social classes in
society, economic equality occurs, and society will be free from all kinds of tyranny. This
goal turned out to be a failure, because the designers of the system did not understand what
human beings really meant. In this system, people were treated as cogs in a machine called
the state rather than a system built on the spontaneous and voluntary interactions of individual
economic actors.
Therefore, the development of Islamic economics as an alternative system is very
necessary, and with this alternative economic system the goal of economic activity to achieve
maqosidus shar'iah, which is an effort to improve the quality of economic activity to improve
the welfare of all human beings can be realized. The religious moral element is thus part of
the Islamic economic theory itself, and the Islamic economic mechanism to achieve prosperity
efficiently is built through the values of justice, equity and the development of the fiscal
sector in encouraging economic dynamics.
Conclusion
The above quote shows that Islamic economic thought in classical times was very
advanced and developed before Western scientists discussed it in the 18th-19th centuries. This
fact must be considered by contemporary economists, not only Muslim economists but also
non-Muslim economists around the world. Contribution of Islamic Economics to Modern
Economics In the past three decades, the study and research of Islamic economics has
flourished again. Various international forums on Islamic economics have been held
frequently and widely in various countries, such as conferences seminars, symposiums and
workshops. Dozens of doctors and professors of Islamic economics who are experts in both
conventional and shari'ah economics, appear as speakers in these forums. From their study,
they found that Islamic economic theory is actually not a new science or a science that is
fundamentally derived from modern economic theory that is developing today. Historical
facts show that classical Islamic scientists are the inventors and founders of all scientific
fields, including economics.
