In a first, and hopefully not a last, I’m happy to have Dr. Jerry Hionis contributing to the site. After reading this article here on “Islamic Economics vs. Global Capitalism”, Jerry offered to give some insight into the fascination with Marxism and those that speak about Islamic Economics and Finance, Jerry himself a former Marxist. Jerry holds a PhD from Temple University. His primary research is in conflict theory with an emphasis on civil conflicts and Warlord-like competition. Other research interests include game theory, economic development, Islamic economic theory and history, political theory and African economics. You can read more about him here.
An Introduction to Marxism for Non-Marxists by a Former Marxist – Part 1
By Dr. Jerry Hionis, Jr.
The terms (or concepts of) “Islamic Economics” and “Islamic Finance” have become buzzwords among both lay and academic Muslims. And while the average person has some quasi-educated opinion on the subject of economics, I have found that most do not truly understand what the field actually studies. Some of the most common explanations of what economists actually study are: the stock market; money; banking; taxes and interest rates; and, general business and entrepreneurial methods. True the previous list of topics are covered under the banner of economics, but the field is actually much more encompassing. As a formal definition, Economics is the social science that studies how individuals, groups, firms, governments and entire societies deal the almost existential problem of scarcity, or the inability to satisfy all wants, needs and desires. In short, economics is about human decision making. Therefore it should be of no surprise that Islam — at its fundamental core — approaches economic theory at almost every turn and is not just about banking.
A common question that has been asked since the beginning of the 20th century is where does Islam fall in the debate between market-based capitalism and state-planned socialism? Needless to say this question is not easily answered but an attempt will be made. What I will attempt to do is bring the debate into context by arming the non-economist (Muslim or not) with a little history and background of the two systems.
Let us begin with the market. What is a market? The colloquial usage of the term market will more often than not arouse an image of a physical place where consumerism occurs: a shopping mall, a supermarket, an agora, a bazar and so on. These examples are technically markets but economists hold a much broader definition of what a market is. To an economist, the market is not the physical location where goods and services are exchange but the actual exchange of these goods and services in and of itself.
So when did markets begin? The fact of the matter is that we really do not know. Markets have always — to a degree — been around when ever a group of humans have chosen to stay stationary around each other. Modern anthropologists state that early man (1) tended to either be nomadic or pastoral. This slowly evolved into a settled society where agriculture and the herding of animals became the basis of society. With a settled society comes commerce; and with commerce, comes markets.
This is what makes markets so fascinating. They were not an idea that was developed, created and then implemented but instead they naturally arose. All the great “classical” economists such as Ibn Khaldun, Adam Smith, David Ricardo, Jeremy Bentham and Alfred Marshall wrote about markets but as an observation of what was already going on. It is correct to claim that these economists suggested policies and ways to augment the market for the better, but they did not invent the market itself.
Overtime the study of markets and economics has advanced into many different schools of thought. While theoretically markets will maximize efficiency and the distribution of goods and services, there are many drawbacks. For a market to work at peak performance, many (and I do mean MANY) assumptions need to hold \ldots which unfortunately tends to be more rare than not. As a result we run into what is known as market failure. To put it bluntly, markets don’t always work as advertised. In some historical cases, such as in Russia, post-colonial Africa and Latin America, China and Germany, markets failed to the extent that their abandonment was sought. Hence the rise of modern or scientific socialism.
[Check in next Thursday for part 2 of An Introduction to Marxism for Non-Marxists]
(1) It should go without saying that I am referring here to mankind as a whole and not excluding the female element. In fact, modern sociologists and anthropologists claim that while there existed a division of labor during the nomadic period of humanity, the division was viewed as being more equal than it was under periods of settled agriculture.
(2) The most common cited avenues that lead to market failure are asymmetric information, externalities and non-private goods and services.
Here’s a bonus, Economic Morality at Radtalks: