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In recent times, Islamic economics has experienced vigorous pursuit among Islamic and non-Islamic thinkers alike. The need for IE arose as more and more Islamic nations got independence from colonial power after World War II. They faced the challenge of development and self-reliance. Capital surplus oil exporters came to acquire large sums of wealth, which managed to establish institutions that were claimed to be run on Islamic principles of finance, economics and social consciousness. In general, the claim is made that Islamic Law (Shari'ah) becomes the centerpiece of the directions of Islamic Economics. Yet the growth of Islamic financial institutions are seen to have created two effects on the recent development in Islamic economics that remain questionable as good academic practice.

First, the Islamic financial institutions were at times politically moved to use certain Shari'ah precepts while they functioned in imperfectly Islamic environments at home and abroad. The motivation, if not the emotion, was based on the need to mobilize resources of Muslim individuals and nations according to the precepts of Shari'ah. It is known however, that the outlets for mobilizing the resources of the Islamic community through these financial institutions were not necessarily Islamic in character. For instance, it has remained a bone of contention among some Islamic economists, whether mark-up pricing (murabaha) in trade of any kind, is legitimate profit or interest. It is also known that simply charging a rate of mark-up lower than the average world rate of interest (quoted by G7 countries), does not constitute a legitimate substitution for the underlying interest rate premise. It is also known that entrepreneurs in many Muslim countries have shirked profit-sharing financial alternatives to interest-bearing ones. Interest transactions remain unequivocally unlawful under Shari'ah.

Secondly, the emerging Islamic economists took stock of the fervour caused by the establishment of Islamic financial institutions, and viewed the economics of financial markets to be foremost in the formulation of Islamic economic ideas. In this area we find a growing concentration of Ph.D. thesis and scholarly papers on money, banking, investment, savings and resource mobilization, and some consequential focus in the area of development financing. International conferences and research bias remained on these areas, to the extent that much of the research funds for the study of Islamic economics today are flowing either from capital rich countries or through endowments set up by grants from the capital rich countries or their rich individual citizens. Thus, Islamic economists and institutions became subservient to the research field of financing resource mobilization of the Islamic individuals and countries in the face of the Islamic commercial and financial developments that have taken place during the last two decades.

To categorize the areas in which most emphasis has been placed by Islamic economists, they are, Islamic finance, money and banking; financing development and resource mobilization; theory and application of Shari'ah in developing secondary capital market instruments; macroeconomic models of Islamic economic systems, monetary and investment relationships; Islamic economic history; and international Islamic economic co-operation. The areas of Islamic microeconomics, growth and comparative systems are given small but growing focus. In all of these areas, the bias remains firmly fixed in the pursuit of either neoclassical or Keynesian methodologies in Islamic economic analysis. In other words, Islamic economists have continued to use existing economic models, logical premises and occidental worldviews to address certain Islamic values and institutional norms. No new demands on fresh economic reasoning are therefore invoked to develop what may be claimed as a distinctive field of Islamic economics. Islamic economics then remains simply mainstream economics with value-judgement introduced into the analysis. This approach is similar to social economics, institutionalism, or of recent days study of socio-economics, all of which are value-laden economic analysis in the neoclassical and Keynesian (post-Keynesian) mould.

There are sparing exceptions in Islamic socio-economic doctrines, where deeper questions of economic epistemology are raised. Better works in this area are by the sociologist, e.g. Shariati. On the other hand, the works by Baqir as-Sadr have proven to be of a populist nature, invoking Islamic economic thinking in comparative perspectives with the capitalist and socialist systems. Islamic economics was subsequently seen to be equatable to a middle way between the capitalist and socialist economic doctrines with a good deal of state intervention. Some Islamic economists equated the latter influence with Islamic welfare state.

FROM ISLAMIC ECONOMICS TO ISLAMIC POLITICAL ECONOMY

It is then important to investigate whether Islamic economics can be logically pursued within the existing methodologies and axiomatic bounds of mainstream economics. Or must Islamic socio- economic analysis be based on an altogether new epistemological premise?

According to the first of these pursuits in the area of Islamic economics, it will be an incorrect view to treat Islamic economics as Islamic political economy. The field of Islamic economics simply constitutes the theoretical and empirical study of positive economic phenonemon with the use of correcting policies and behavioural norms prescribed by Islam. Islamic economic history can then be taken up in this area to play an exogenous body of study, which at best, conveys the historical ways in which the Islamic norms were understood and implemented. Such an approach to the study of Islamic economics necessitates no fresh demand on nor development of, the epistemolgical foundations of morals, ethics and values that essentially endogenize the Islamic system of socio- economic reasoning. It is not sufficient for such endogenous premises of values to be simply drawn from the Qur'an and Sunnah, and then be subjected to rigorous scientific investigation. It is necessary as well for such an intellectual inquiry to become universally acceptable in some form to the scientific community and institutions by its sheer analytical prowess. The ideas so discovered and developed must then be capable of intellectual dissemination in the classrooms, scientific fora and through national and international institutions. This is the Islamic worldview that remains pervasive, inexorable universally.

In this second approach to the study of Islamic socio-economic doctrines, such a discipline must intellectually cease to be classified as `economics'. It will be substantively replaced by the idea of political economy. But here too, the idea of political economy would be a singularly different one from that of classical, neoclassical, Marxist and institutionalist persuasions. Included in the last category is also the Keynesian idea of political economy.

The reason for this difference in substance of the terminology is that Islamic political economy is essentially a study of the endogenous role of ethico-economic relationships between polity and the deep ecological system. Within this grand ecological system is the subsystem of the market. But the Islamic market is neither severed from the social and socio-political system nor is it overly interrupted by institutional policing. Islam places high respect on the market process, but necessitates its moral standing.

The polity of the Islamic socio-economic system is called Shura. The Shura is constituted of decision-makers who are learned persons in the tenets of Shari'ah on specific political, socio- economic and scientific issues. These fields when viewed in the light of the broadest application of Shari'ah, become of the nature of Deen (divine code of life). The decision-makers in such Shuras come from very decentralized areas of life with participatory democratic privileges to form collective decisions. Such decisions are colectively formed through voting (complete or partial social consensus) in the Shura. The Shura formulates market friendly, socially friendly policies for morally ethicizing such systems. Such on-going interactions generate polity-market interrelationships, with the market system responding to the policy regimes instituted by the Shura on the basis of knowledge of Shari'ah on specific issues (formation of Ahkam, or rules from fundamentals, Usul). The power structure of polity-market interactions of an ethico-economic type thus explained by the Islamic concept of political economy, is aimed at developing integration through interactions between the Shura and the market system in accordance with the precept of the Qur'an and Sunnah.

The strength of these sources of knowledge in Islamic political economy is based on the belief that human reason must comprehend naturally the inevitablity and perptuation of truth in God's Oneness in the order of things (Tawhid). The Precept of Oneness forms the primordial foundation of Shari'ah. This guides the Shura in deriving its knowledge from the premise of Shari'ah (Usul) and developing necessary policy prescriptions on specific issues (Ahkam). A knowledge-based process of transformation is then generated in the socio-scientific thinkers in the Shura (i.e. among the Sharees), in the institutions that such knowledge development influences, and in the society at large that the above two integrate to transform. In this knowledge-forming process, the Precept of Unicity of God as the unifying worldview (weltanschauung) for understanding and inculcating truth through integrating interrelationships between God (Shari'ah), man (socio- economic order = Istihsan or Muamalat) and nature (scientific order, Khalq).

One then notes carefully, that the concept of Shura as consultation, now taken up as interactions leading to integration (=social consensus) in aall issues before it, is a universal property of systems and processes. It is not simply limited to the political order. It takes up polity-market (better as deep ecological interrelations) interactions. Such interactions are also pervasive in all enterprises and institutions, wherever decision making exists in the small and in the large. Shura thus assumes the intrinsic property of a universal process. Such a worldview of the universal and infallible character Shura is essentially the Qur'anic idea of creative evolution combined by the attributes of just balance, just purpose, certainty, felicity and reorigination.

ISLAMIC POLITICAL ECONOMY DEFINED: A COMPARATIVE STUDY

In summary then, Islamic political economy is the study of interactive relationships between polity (Shura) and the ecological order (with market subsystem). These interactions are made to develop human comprehension, social receptivity and institutionalization of Shari'ah in the conduct of life. Such a worldview of ethico-economic relations is developed through the primacy of the Oneness of God as substantively understood in the socio-scientific order. Thus the Shura as a process perpetuates its existence in the midst of this unifying worldview. It is neither the objective nor the strength of Shura to use forced institutional intervention, or for that, to permit irresponsible market pursuits. Values thus become the endogenous engines of Islamic transformation in such an interactive and integrative polity-market system.

THE PRINCIPLES OF ISLAMIC POLITICAL ECONOMY

It is commonly agreed upon by all sections of Islamic thinkers, that one of the prime attributes of God (hence of the Unity Precept) is justice (Adl). The concept of justice is expressed in the Qur'an and Sunnah in terms of the broadly comprehensive concept of balance. In the limited sense of socio- economics, just balance becomes distributive justice. But since the precints of political economy encompass both society, economy and deep ecology, the narrower concept of distributive equity is replaced by the idea of social justice in the Islamic political economy. Besides, there being no difference between the antecedentalist and consequentialist phases of social justice in the sense of continuity between the epistemic and ontic, so the ideas of social justice and distributive justice must remain inseparable in Islamic political economy. Hence, the Unity Precept, which must be the principal premise of knowledge in Islamic political economy, must fully define the laws governing social justice in this comprehensive sense.

The Qur'an and Sunnah also emphasize the central need for guarantee and protection of property rights or entitlement. Thus we find the high value of market processes in Islamic political economy and the non-coercive power of Shura. The Shura acts principally as a knowledge-forming agency for the guidance of society in accordance with Shari'ah, and brings socially unfriendly consequence under control through its supportive agencies, such as Al-Hisbah (social regulatory body for markets). Besides, because of the unifying concept of social justice in Islamic political economy, the concept of property rights must also invoke guarantee and protection of all forms of property rights concerning human possession and welfare.

The role of work and productivity must be considered as a subset of the principle of entitlement (property rights) (Haq al- Mal). Such a sub-principle cannot be raised to the level of a full- fledged principle for reasons that social productivity and entitlement must mean caring and protection of the needy, the weak, the old, the young and the underprivileged. It is also found, that an Islamic economy may have a significant profit-sharing and cooperative sector. In this case, the concept of work is not understood in terms of wage-payments alone; nor is the contribution of output interpreted either as average or marginal productivity, as in the neoclassical sense. However, in any case, since this aspect of social justice and subsequently, universal formation and protection of property, cannot be realized in the absence of productive work and capital formation, therefore, the sub-principle of work and productivity is an implied subset of the principle of entitlement.

We have thus established the minimal set of three principles of Islamic political economy, namely, first, the Unity Precept of God (Tawhid which is supported by the Sunnah of Prophet Muhammad); secondly, the principle of social justice; thirdly, the principle of entitlement (or property rights, of which is a sub-principle of work and productivity). To this minimal set can be added other sub- principles, such as, prayers, responsible behaviour, generosity, kindness (Ehsan), duties to God (Hablum-Min- Allah), duties to man (Hablum-Min-Annas), etc. But these attributes are obviously included in the relationship of Tawhid with the formation of laws (Shari'ah) governing both social justice and entitlement. It is seen as well that the three principles circularly interrelate with each other.

THE PRINCIPAL INSTRUMENTS OF ISLAMIC POLITICAL ECONOMY

Next, we will examine the field of instruments of Islamic political economy based on and serving the above fundamental principles. All Islamic economists agree that the abolition of interest (Riba) is a mandatory injunction of the Qur'an. The argument is both of a moral and economic nature. The Qur'an points to interest, irrespective of its magnitude, as an undue charge and a take by the rich from the poor. There is however, considerable debate among the Islamic learneds (Fuqaha) as to what constitutes interest in all its forms -- physical exchange of items and trade in monetary assets.

The mention of profit-sharing under economic cooperation amongst all forms of participants in investment and production is implicit in the Qur'an, but is directly invoked in the Sunnah. This instrument is known as either Mudarabah (profit-sharing with cooperation) or Musharakah (equity participation). The institution of profit-sharing under economic cooperation at all levels of the Islamic political economy, is the principal alternative for replacing interest-bearing transactions. Hence, since abolition of Riba is a fundamental condition for attaining social and economic welfare and justice, the institution of Mudarabah and Musharakah must be equally important instruments for making the elimination of Riba effective.

The Qur'an has placed the highest importance along with prayers, on the duty of paying wealth tax (Zakat) by the wealthy for the rehabilitation of the needy. Zakat revenues are to be collected and disbursed in an organized way. In early era of Islam this method of managing Zakat funds was known as Bait al-Mal, the Public Treasury. Zakat marginalizes other forms of direct taxes in the Islamic political economy, for the Government comes to assume minimal function in such a system, while the responsibility to generate economic activity is predominantly passed on to the market economy with a Shuratic guidance.

Zakat along with elimination of Riba and its replacement by Mudarabah/Musharakah, constitutes a form of enhanced spending in the economy. The absence of interest-bearing on personal loans along with the gift of Zakat, generates a form of grants economy, with their impetus on investment and spending through the attributes of human solidarity and goodwill.

Finally, the Qur'an is emphatic on the elimination of economic waste through ostentatious consumption and wasteful production (Israf). Elimination of Israf is seen to logically link up with the efficiency of Mudarabah, which then results in an impetus to eliminate Riba. Riba itself is considered as a form of Israf in the Islamic sense. But to the extent that Zakat disbursement is a function of relative poverty and a relative concept of need, over and above absolute poverty levels, and depends on population size in these brackets, therefore, this disbursement would increase either by an increase in national incomes or by a reduction of the target population size. Hence, an effective reduction of waste followed by its consequential relationship with Mudarabah, would mobilize capital into productive investments. This will have an enhancing effect on Zakat to combat poverty and generate more distribution.

We have now established the minimal number of instruments needed for the Islamic political economy. These are, abolition of Riba, institutions of Mudarabah/Musharakah; the institution of wealth tax, Zakah; and the elimination of waste, Israf. On top of these other instruments can be built (e.g. Murabaha, Bay Muajjal, Unit Trust etc.). But the more detailed list of instruments does not turn out to be independent of the minimal core stated here.

For example, mark-up in foreign trade financing (Murabaha), rental (Ijara), leasing (Ba'y Muajjal), interest-free loans (Qard- e-Hassanah), endowments (Waqf), a range of Shari'ah prescribed secondary market instruments, etc., can be added to the minimal list of instruments. But these would simply belong to a category of Mudarabah/Musharakah instruments. Besides, the latter categories being derivatives of the minimal set, have not been mentioned either in the Qur'an or the Sunnah. Hence, the latter list of instruments give details rather than principality. They are also subject to options, unlike the instruments of the minimal set, which form the principal category.

INTERACTIONS BETWEEN THE PRINCIPLES AND INSTRUMENTS

It can now be seen how these instruments link up with the principles of Islamic political economy and vice-versa. The universal application of Shari'ah (thus, Tawhid) inculcates social responsibility to establish justice and property rights amongst all. In order to realize this social objective, the instruments must be activated. This direction of relationship establishes the interactive realization in knowledge formation in Islamic political economy. Conversely, starting from the premise of instruments, the activation of socio-economic activity in conjunction with the exercise of the instruments, leads to better comprehension of Shari'ah through the socio-economic efficacy that it imparts through the prescribed instruments. This forms the cycle of knowledge formation. Hence, the interactions between the principles and instruments in the Shura along with the responses from the socio-economic variables (most importantly the spending variable and its socio-economic effects) that are affected by such knowledge formation, establishes circularity as the basis of evolution of the Islamic political economy on the basis of knowledge formation.

The anthropic power of the Shuratic model is realized in its real world application and in the heuristic form of institutional behaviour. Its general features only and not the predictive form, can be modelled mathematically by simulation methods.