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.