If fundamentalist parties take power, how will they do business?
By Stephen Glain
Judeo-Christian scripture offers little economic instruction. The Book of Deuteronomy, for example, is loaded with edicts on how the faithful should pray, eat, bequeath, keep the holy festivals and treat slaves and spouses, but it is silent on trade and commerce. In Matthew, when Christ admonishes his followers to “give to the emperor the things that are the emperor’s,” he is effectively conceding fiscal and monetary authority to pagan Rome.
Islam is different. The prophet Muhammad—himself a trader—preached merchant honor, the only regulation that the borderless Levantine market knew. In Muslim liturgy, the deals cut in the souk become a metaphor for the contract between God and the faithful. And the business model Muhammad prescribed, according to Muslim scholars and economists, is very much in the laissez-faire tradition later embraced by the West. Prices were to be set by God alone—anticipating by more than a millennium Adam Smith’s reference to the “invisible hand” of market-based pricing. Merchants were not to cut deals outside the souk, an early attempt to thwart insider trading.
Today, with a spiritual revival sweeping much of the Muslim world and with the Bush administration still keen on democratizing the region, it is worth asking how an Islamist movement would manage the economy. Since 2001, Islamist parties have made strong showings or won elections in 10 Arab countries (Morocco, Jordan, Lebanon, Turkey, Iraq, Iran, Bahrain, Egypt, Kuwait and Pakistan) and the Palestinian Authority. And none are clashing with the West on free-market economics. In Iraq, the supply-side economic-reform plan submitted in 2003 by former U.S. administrator Paul Bremer has survived with only minor revisions under Baghdad’s new Shia-dominated government.
An interesting test came in the January election in Egypt, when the Muslim Brotherhood—the fountainhead of modern Islamism—took a fifth of the seats in Parliament. Now the largest opposition party, much of the brotherhood’s appeal rests on its network of hospitals, schools and charities, which are often superior to state services (and help explain why the secular regime cracks down harder on the secular opposition than on the religious one). Fortunately for the reform-minded prime minister, Ahmed Nazif, the brotherhood’s economic agenda is largely consistent with his own, albeit with a more populist twist.
The brotherhood embraces free-trade deals in general, but criticizes the government for failing to negotiate better terms for Egyptians. Though Islam tends to frown on tax collection, the brotherhood supports tax reform (not abolition) and opposes a proposed flat tax as regressive. It even endorsed the recent decision to lift budget-busting food and fuel subsidies, but wants to use Egypt’s ample natural-gas reserves to finance a less painful transition to market prices. “It must be done gently,” says Mohammad Habib, the brotherhood’s first deputy chairman, “with the objective of reducing the gap between rich and poor.”
In the 1950s, as the brotherhood gained political momentum, it opposed President Gamal Abdel Nasser as much for his decision to nationalize the Egyptian economy as for his fierce secularism. Muhammad, says Yasser Abdo, a Muslim Brotherhood member and a former economist at the International Islamic Bank for Investment and Development in Cairo, “believed in the private sector as the basis of productive activity,” with a “limited” state role.
Today, brotherhood parliamentarians remain anti-statist and staunchly antitrust, citing a verse in the Qur’an: “He who brings commodities to the market is good, but he who practices monopolies is evil.” Not that any member goes as far as questioning the OPEC cartel. As Cairo University economist Abdel Hamid Abuzaid puts it, Islam promotes “competition of a cooperative” nature, not the “cutthroat” Western kind.
Politically, at least, the objective of fundamentalist Islam is to restore the Islamic caliphate, the unified Muslim kingdom of the 7th to the early 20th centuries that stretched from the Hindu Kush to the Strait of Gibraltar. This rhetoric turns more practical on the subject of trade. “If the ancient caliphate can revive itself,” says Habib, who has a U.S. doctorate in geology, “it will happen through regional commerce.” A brotherhood in power, says Habib, would respect Cairo’s free-trade agreements—though the group appears to be divided over whether it would honor one with Israel.
In the days of the caliphate, Islam developed the most sophisticated monetary system the world had yet known. Today, some economists cite Islamic banking as further evidence of an intrinsic Islamic pragmatism. Though still guided by a Qur’anic ban on riba, or interest, Islamic banking has adapted to the needs of a booming oil region for liquidity.
In recent years, some 500 Islamic banks and investment firms holding $2 trillion in assets have emerged in the Gulf States, with more in Islamic communities of the West. British Chancellor of the Exchequer Gordon Brown wants to make London a global center for Islamic finance—and elicits no howl of protest from fundamentalists. How Islamists might run a central bank is more problematic: scholars say they would manipulate currency reserves, not interest rates.
The Muslim Brotherhood hails 14th century philosopher Ibn Khaldun as its economic guide. Anticipating supply-side economics, Khaldun argued that cutting taxes raises production and tax revenues, and that state control should be limited to providing water, fire and free grazing land, the utilities of the ancient world. The World Bank has called Ibn Khaldun the first advocate of privatization. His founding influence is a sign of moderation. If Islamists in power ever do clash with the West, it won’t be over commerce.