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The Islamic Welfare State

Chapra M. ‘Umar

Commentary

Born and raised in Pakistan, Dr. Chapra earned a doctorate in economics from the University of Minnesota. He has held academic posts in America and Pakistan, served as Senior Economist for the Pakistan Institute of Development Economics, and is currently Economic Advisor to the Saudi Monetary Agency.

In this selection, the author notes that Islam’s position on the acquisition of wealth is a moderate one. Some inequality is acceptable, because the religion’s provisions acknowledge differences among individuals in regard to their abilities and their contributions to society, but inequity is unacceptable. Islam thus naturally supports a system of welfare to attend to the less fortunate in society. Chapra, like many of the preceding writers, concludes that Islamic society differs completely from both socialist and capitalist systems.

Social Security and Equitable Distribution of Income and Wealth

It is the duty of the Islamic state to ensure a respectable standard of living for every individual who is unable to take care of his own needs and hence requires assistance. The Prophet clearly declared that: “He whom God has made an administrator over the affairs of Muslims but remains indifferent to their needs and their poverty, God will also be indifferent to his needs and poverty.”1 He also said that: “He who leaves behind him dependants, they are our responsibility”2 Ibid., p. 124. and that “the ruler [state] is the supporter of him who has no supporter.”3 Ibid., vol. 1, p. 481. These and other similar hadīths lay down the gist of Islamic teachings in the realm of social security.

‘Umar, the second Caliph, explaining distributive justice in Islam, emphasized in one of his public addresses that everyone had an equal right in the wealth of the community, that none, not even he himself, enjoyed a greater right in it than anyone else, and that if he were to live longer, he would see to it that even a shepherd on Mount Sinai received his share from this wealth. . . .

The Islamic concept of justice in the distribution of income and wealth does not require equal reward for everyone irrespective of his contribution to society. Islam tolerates some inequalities of income because all men are not equal in their character, ability, and service to society (Qur'ān 6: 165, 61: 71, and 43: 32). Therefore, distributive justice in the Islamic society, after (i) guaranteeing a humane standard of living to all members through proper training, suitable job, “just” wages, social security and financial assistance to the needy through the institution of zakāt, and (ii) intensifying the distribution of wealth through its system of dispersal of the estate of a deceased person, allows such differentials in earning as are in keeping with the differences in the value of the contribution made or services rendered to society.

The Islamic stress on distributive justice is so emphatic that there have been some Muslims who have been led to believe in absolute equality of wealth. Abū-Dharr, a companion of the Prophet, was of the opinion that it is unlawful for a Muslim to possess wealth beyond the essential needs of his family. However, most of the Prophet's companions did not agree with him in this extreme view and tried to prevail upon him to change his position. . . .

The Wherewithal

To live up to all the above obligations, the Islamic state would naturally stand in need of adequate financial resources. . . .

One principle which is clearly recognised by all jurists is that the state has no right to acquire resources by confiscating property duly possessed by individuals or groups. . . .

If the acquisition of resources through either confiscation or national-isation without just compensation is to be ruled out then the primary sources left would be the following in addition to the sale of relevant services.

i. Zakāt;

ii. Income from natural resources;

iii. Taxation; and

iv. Borrowing.

To enable Muslims to bring to fulfilment a society which is like a single nuclear family, where wealth is equitably distributed and where the essential needs of all deserving individuals are met primarily by mutual help with the planning and organisational assistance of the state, Islam has instituted a powerful social security system giving it a religious sanctity which it enjoys nowhere else in the world. It is a part of the religious obligations of a Muslim to pay zakāt at a prescribed rate on his net worth or specified income flows to the zakāt fund. Of such great significance is the institution of zakāt in Islam that whenever the Qur'ān speaks of the obligation to establish prayers it also simultaneously stresses the obligation of Muslims to pay zakāt. The Prophet went so far as to declare that “whoever offers prayers but does not pay zakāt, his prayers are in vain.”4

There is a general consensus among jurists that collection and disbursement of zakāt is essentially the responsibility of the Islamic state. This was the practice during the days of the Prophet and of the first two Caliphs, Abū-Bakr and ‘Umar. Abū Bakr even used coercion against those who refused to pay zakāt to the state. . . .

However, even if the state collects zakāt, the proceeds are likely to be limited. Moreover, the expenditure heads for zakāt are clearly enumerated in the Qur'ān. Even though some jurists have widened somewhat the coverage of the expression fī sabīl Allāh (in the way of Allah), it can hardly be made to include all expenditure heads of the Islamic state. Thus, if the Islamic state is to live up to its obligations it must have access to the resources beyond the zakāt collection. . . .

It has already been established that natural resources have been provided by God for the welfare of all people. The monetary benefit derived from these resources should, therefore, permeate to all people and should not under any circumstances be allowed to be diverted solely to certain individuals or groups. The acceptance of this principle does not necessarily restrict the management of these resources to the state alone. Whether the state or private enterprise should manage the exploitation of these resources should be determined by the criterion of efficiency. However, even if private enterprise is to manage and operate these resources the profit derived by it should not be more than what is justified by the services rendered and the efficiency attained.

In countries with abundant natural resources to contribute an adequate income to the state treasury to finance public expenditure (as is the case in some major oil-producing Muslim countries) there may be little need for additional sources of revenues. However, countries where income from this source is either not available, or if available, is not sufficient, the state would have to supplement its income by resorting to taxation and/or borrowing if necessary.

The right of the Islamic state to raise resources through taxes cannot be challenged provided that taxes are raised in a just manner and are within a certain “bearable” limit. This right is defended on the basis of the Prophetic saying that “in your wealth there are also obligations beyond the zakāt,” and one of the fundamental principles of Islamic jurisprudence that “a small benefit may be sacrificed to attain a larger benefit and a smaller sacrifice may be imposed in order to avoid a larger sacrifice.”

Most jurists have upheld the right of the state to tax. According to Marghīnānī, if the resources of the state are not sufficient, the state should collect funds from the people to serve the public interest because if the benefit accrues to the people it is their obligation to bear the cost. Abū Yūsuf also supports the right of the ruler to increase or decrease taxes depending on the ability of the people to bear the burden. However, only a just tax system has been held to be in harmony with the spirit of Islam. A tax system which is oppressive and too onerous as compared with the ability of the people to bear has been unanimously condemned. All rightly-guided caliphs, particularly ‘Umar, ‘Ali, and ‘Umar ibn ‘Abd al-‘Azīz, are reported to have stressed that taxes should be collected with justice and kindness, that they should not be beyond the ability of the people to bear, and should not deprive the people of the basic necessities of life. . . .

In view of the goals of social justice and equitable distribution of income a progressive tax system seems to be perfectly in harmony with the goals of Islam. It must, however, be emphasized that from the discussion of the jurists what is relevant from the point of view of modern times is the right of the Islamic state to tax with justice. It would not be proper to conclude that taxation should be strictly confined to the items mentioned by the jurists. Circumstances have changed, and there seems to be the need for devising a tax system which is in harmony with the goals of Islam and yields sufficient revenue to allow a modern Islamic state to discharge its functions as a welfare state.

If total revenue from all the above sources (including sale of services) is not sufficient, the Islamic state would stand in need of borrowing. In this case because of the Islamic injunction against interest, the borrowing would need to be free of interest.

For certain sound income-yielding projects amenable to sale of services and distribution of dividends it may be possible to raise funds on the basis of profit-sharing. However, the scope for this is limited in the case of most public projects. In case profit-sharing is not possible or feasible, the Islamic state may have to borrow funds, and this would be possible only if the private sector of the Muslim society is so highly inspired by the ideals of Islam that it is willing to forego the return. In modern acquisitive Muslim societies imbued perhaps more with hedonistic ideals of the economic man as conceived by Adam Smith rather than by the altruistic teachings of Islam, and with continuous erosion of the real value of savings because of the high rate of inflation, it may be expected that borrowing without any return may tend to be unproductive unless it is made compulsory.

“Richest” or “Ideal”

It may be contended here that all Islamic states may not have access to “adequate” resources to finance the functions discussed above and could not hence become “ideal.” Here it is important to clarify that the “ideal” Islamic state should not be confused with the “richest” one. The ideal is to be construed in the light of general spiritual and material welfare attained for God's vicegerents within the framework of resources. Hence an Islamic state may be considered to have attained the position of “ideal” if it has at least (i) elevated the spiritual level of the Muslim society and minimised moral laxity and corruption; (ii) fulfilled its obligations for general economic welfare within the limits of its resources; and (iii) ensured distributive justice and has weeded out exploitation. Adequacy of resources is a relative term and is to be judged against attainable standards in the light of the stage of economic development.

Nature and Identity

The above discussion indicates that the Islamic state is essentially a welfare state and is duty-bound to play an important role in the economy for the fulfilment of the goals of the Sharī‘a in the economic field as briefly specified above. This welfare role is, however, to be played within the framework of individual freedom which Islam values greatly. The most important pillar of the Islamic faith is the belief that man has been created by God and is subservient to none but Him (Qur'ān 13:36) and that one of the primary objectives of the prophetic mission of Muhammad (peace be on him) is to release mankind from all burdens and chains enslaving it (7:157). This provides not only the essence of the Islamic charter for individual freedom from all bondage but also subjects man to the sovereignty of God in all aspects of life which essentially implies subordination of man to the moral law as specified in the Qur'ān and the Sunna.

Because man is born free, no one, not even the state, has the right to abrogate this freedom and to subject him to regimentation. . . .

It is to realise this norm of individual freedom that Islam has incorpor-ated in its economic system the essential elements of free enterprise after conditioning it to its own norms and values. The institution of private property along with the market mechanism has been integrated into the Islamic system in such a manner that an “appropriate” part of the production and distribution of goods and services is left to individuals and voluntarily constituted groups enjoying freedom in their dealings and transactions. The profit motive has also been upheld as, besides being consistent with human nature, it provides the necessary incentive for efficiency in the use of resources which God has provided to mankind.

However, since social welfare has a place of absolute importance in Islam, individual freedom—though of considerable significance—does not enjoy a place independent of its social consequences. It is sacred only as long as it does not conflict with the larger social interest or the overall spiritual and material goals of Muslim society, or as long as the individual does not transgress the rights of others. Property can be owned privately but is to be considered a trust from God and is to be acquired and spent in accordance with the terms of the trust. The profit motive has also been subjected to certain moral constraints so that it serves individual interest within a social context and does not lead to economic and social ills or violate the Islamic goals of social justice and equitable distribution of income and wealth.

Mixed Capitalism? Socialism?

All these various considerations make the Islamic state completely distinct from both the socialist and the capitalist systems. First of all, socialism, as conceived by Marx, is basically amoral and based on the concept of dialectical materialism; while capitalism, being a secular ideology is, at best, morally neutral. In contrast Islam lays emphasis on both the moral and the material aspects of life and erects the edifice of economic well-being on the foundation of moral values. The foundation being different, the superstructure is bound to be different too.

Moreover, Islam is also fully committed to human brotherhood with social and economic justice, to equitable distribution of income, and to individual freedom within the context of social welfare. Although both socialism and mixed capitalism also claim to pay allegiance to social justice, the concept of justice in socialism or mixed capitalism is not based on human brotherhood reinforced by inviolable spiritual criteria for social and economic justice. In fact, Marxist socialism under the influence of dialectics condones injustice done by one group to the other and even the annihilation of one group by the other. In laissez faire capitalism with its slogan of “Don’t interfere, the world will take care of itself” there was no innate ideal of social justice to be attained through conscious state effort, while in mixed capitalism the roots of social justice lie in group pressures rather than in an intrinsic belief in human brotherhood.

Although capitalism also recognises freedom of the individual there are no spiritual constraints on this freedom. The constraints that do exist are determined primarily by the pressures of competition or the coercive power of the state, and secondarily by changing social norms without any spiritual sanctity. In the Islamic system, however, the individual is subject to inviolable spiritual values in all aspects of life, including the acquisition, spending and distribution of wealth. Islam normally recognises, like capitalism, the freedom of enterprise with the institution of private property, the market system and the profit motive, but it differs from capitalism because, as already indicated, property in Islam is a trust from God and man as trustee and vicegerent of God is responsible to Him and subject to His guiding principles.

Although both socialism and capitalism recognise equitable distribution of income, in capitalism this recognition is again an outcome of group press-ure while in socialism it is accompanied by negation of individual freedom. Islam achieves this equitable distribution within the framework of individual freedom but with spiritual and legal imperatives to safeguard public interest, moral constraints against unearned income, and social obligations to ensure a just distribution of income and wealth.

The Islamic welfare state is hence neither capitalist nor socialist. It is based on its own values and guided by its own goals. It has its own identity and bears no resemblance to any other form of state.

Bibliography references:

From “The Islamic Welfare State and Its Role in the Economy,” in Islamic Perspectives, ed. Khurshid Ahmad and Zafar Ishāq Ansārī (Leicester: The Islamic Foundation, 1979), pp. 208–17.

1. Abū-Dāwūd al-Sijistani, Sunan Abū-Dāwūd (Cairo: ‘Isā al-Bābī al-Halabī, 1952), vol. 2, p. 122.

4. Abū-‘Ubayd Qāsim ibn Sallām, Kitāb al-Amwāl (Cairo: at-Maktabah al-Tijāriyah al-Kubra, a.h. 1353), p. 354:919.

Notes:

2. Ibid., p. 124.

3. Ibid., vol. 1, p. 481.

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