Economic and Political Reform in Muslim Countries

There are two undeniable facts about most Muslim countries (countries that belong to the Organization of Islamic Cooperation): they have had sub-par economic performance for decades ( and they need fundamental economic reforms if they are to become 'Muslim Tigers,' that is, to achieve more rapid and sustainable economic growth. But can fundamental economic reforms be adopted and implemented without political reforms? Our answer is an unequivocal no.

Effective and sound institutions (essentially the rules of the economic game with the aim of reducing business transaction costs to increase business confidence, investment and thus support a thriving private sector) are the required bedrock of a successful economy. The institutional structure of a society is composed of constitutions, laws and rules that govern the society, its government, its finances, economics and politics; written rules, codes, and agreements that govern contractual relations and exchange and trade relationships; and social norms governing human behavior.

For economic success, conventional economics recommends institutions that include a legal system that is fair and just, where all citizens are equal before the law; sound business regulations, their monitoring and enforcement; the protection of private property; contract enforcement; a tax system that is accepted as fair and is universally enforced; and transparency in public decision-making. The Islamic economic and financial system embraces these recommendations but demands even more of Muslims--social and economic justice and morality in all economic interactions. In Islam, the rules, institutions, operations and practice of the Islamic economic and financial system are outlined in the Quran and interpreted and put into practice by the Prophet Mohammad. While the Quranic outline is time immutable, its practice must be adjusted to prevailing conditions. The Quran provides Muslim societies with the road map to develop effective economic institutions for achieving just and thriving communities.

The Islamic economic system is a far cry from the capitalist system. A comparison of the two reveals some common features, such as private property, profit motive and reliance on markets. Even the economy envisioned by Adam Smith in which the Almighty prescribes rules of behavior--which humans translate into moral rules that govern the behavior of market participants and where self-control, sympathy for others and just behavior limit greed--could be considered a rough approximation of the Islamic vision of an economy. However, since the nineteenth century, capitalism has not resembled either of these visions. It has practices that do not exist in Islam or are prohibited, such as unlimited accumulation of private property and wealth, acceptance of poverty, consumerism and wastefulness, extravagant and opulent consumption, highly unequal distribution of income and wealth, the adverse impact of environmental degradation, and growing financial and economic exclusion.

The hallmark of a rule-abiding Muslim community is justice. An Islamic economy is one where everyone who is able works hard, using knowledge to combine with their own labor and the resources provided by the Creator, to produce goods and services for society. Economic, social and political affairs are conducted with the goal of removing barriers to the progress of all humans. Knowing that they are responsible and accountable, individually and collectively, Muslims invest allegiance in a legitimate authority to carry out their affairs, with the legitimacy of the authority established by rule-compliance. The Islamic rule, "commanding the good and forbidding evil," applicable to individuals and society, assures the full and active participation of all in the affairs of society and a just and representative political system.

The main reasons for the economic under-performance of Muslim countries over the past decades has been non-compliance with the rules of behavior--by Muslims and their governments--and the absence of effective institutions to support thriving societies. How can conditions in Muslim countries be turned around? It requires commitment on the part of individual Muslims to uphold rules, to demand the same of their rulers/governments, and ultimately to develop and nurture the needed institutions.

Muslims must individually and collectively take charge of their religion and openly debate and question what their religion says about rules, institutions and the outcomes that they should expect. They should discuss what their religion indicates in practical terms, for the political, social and economic characters of a successful Muslim society. Memorizing the Quran, while useful in itself, is not a substitute for understanding the Quran and its interpretation by the Prophet. Moreover, Muslims should not rely on individuals with agendas-- dictators, extremists, selfish rulers, politicians or clerics--to tell them what they should and should not do as 'good' Muslims. God has given humanity the freedom to choose and Muslims should take advantage of this invaluable gift. The Quran requires individual Muslims to develop themselves, the physical world and their societies. Individual Muslims have a critical role and must do their part in creating just and flourishing communities. At the same time they must hold their leaders accountable and answerable to the community.

We started this blog with the question--can fundamental economic reform that is essentially made up of effective institutions be adopted and implemented in the absence of political reform? Our answer was no. After considering what reforms and institutions entail, the reasons for our answer should be evident. Dictatorships, absolute monarchies, military rule and theocracies that justify their rule by invoking God will not secede power that has enriched them and has facilitated the continuation of their corrupt and unrepresentative rule.

Simply said, under the rule of law and representative governance that are basic institutional requirements, most Muslim rulers would be swept away.

Anyone with eyes can see that most rulers in the Muslim World are not rule compliant and have used religion for control and self-enrichment. It is not Islam that threatens the non-Muslim world, but its misrepresentation and Muslim dictators whose selfishness and autocratic rule have fueled extremism and millions of disenfranchised Muslims. Dictatorships, autocratic rule and economic failure and their unfounded association to Islam are an important cause of extremism, terrorism and instability. It is better institutions and meaningful economic and political reforms in Muslim countries that are essential for development and progress and peaceful co-existence with the West. But the needed institutions, especially the rule of law and representative governance, will not develop under existing political conditions in most Muslim countries. For the required economic institutions to develop, be nurtured and be effective, they must be accompanied by fundamental political change.