Three Generations of Islamic Economics
A paper on this topic is linked here: Three Generations of Islamic Economics. The abstract for the paper provides a brief introduction to this terminology:
ABSTRACT: The idea of social science is based on the false assumption that universal laws applicable to all societies can be derived from the historical experiences of European societies. Instead, we argue that all social theory emerges as an attempt to handle challenges facing particular societies within a particular historical context. Whereas the name "social science" suggests a set of laws that work in the same way for all societies, we argue that social theories can only be understood within their particular historical context. The paper analyzes the historical circumstances which led to the emergence and evolution of Islamic Economics over the past seventy years.
The first generation of Islamic Economics emerged as part of the struggle for liberation in the colonized Islamic lands after the Second World War. The first generation argued that Western economic systems – capitalism, communism, and socialism – were created by human beings, led to inequities and injustice, and brought misery to the masses. Instead, they offered the vision of a system built on the teachings of Islam which would serve and promote the welfare of all members of society. Failure to achieve the political control required to create genuinely Islamic socio-political systems led to the emergence of the second generation in the mid-1970s. Whereas the first generation had rejected capitalist economics, the second generation sought to build an Islamic Economic system within a capitalist framework. The defects of both the capitalist system, and the accompanying economic theory, became glaringly obvious to all in the global financial crisis of 2007-8. This led to a re-evaluation of the 2nd Generation approach and the birth of the Third Generation of Islamic Economics, which seeks to go back to the revolutionary ideas of the First Generation. The critical insight at the heart of the third generation is that capitalism is fundamentally incompatible with Islamic ideals, and must be rejected and replaced by an alternative system built on Islamic foundations. The goal of this paper is to describe the historical contexts within which the three generations emerged. Also, we aim to describe the central characteristics of the third generation of Islamic Economics, which builds on the experiences gained from both the first and second generations.
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This paper was presented at a conference on Islamic Finance at the Allama Iqbal Open University on Thursday Nov 2nd 2023. A video for the talk is linked below:
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1yJazakallah khair. Is Islamic economic a reactionary movement then in your view, based purely on the failure of capitalism and socialism? And as the Islamic civilisation of course goes back 1400 years, what would you say about the economic system of the earlier periods, as even your first generation is from a relatively modern period?
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1yVery true Western Economics keeps us in cesspool of corruption.
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1yBased on my experience in US and what I know about my faith, I am proposing a trans dunya and akhira economic system where our monetary world currency is traded for benefit in akhira. Money, time, energy, knowledge given in this world with positive intentions results in gain, in blessings and stations in akhirah, investing here with good thoughts, words and actions results in many fold return in next permanent world. No khutba or imam has explained it this way. I just thought of it, incidentally, but seems profound and applies to individuals, families, communities, nations and the world. We always tend to think economics is restricted to the material world and things only. If even a smile is charity, know that every smile is recorded in our accounts register Let's face it, after we die, we get audited by Allah subhana wa tala...for what we did or did not do ... Unfortunately most of the Ummah is stuck intellectually and spiritually, and we have not been able to reframe our responsibility or our opportunities in a meaningful way. The reformation of the understanding, which Allama Iqbal advocated for, has not taken place. Most are still focusing on length of beards and wondering if nail polish is haram. Very sobering.
As a proud Generation Xer, the qualities of being resourceful, independent, and balanced are the ones that define me. I have used these qualities to carefully craft my career as a Business Professional.
1yAsad Zaman Sahib, I want to extend my heartfelt appreciation for your remarkable article, Your findings are truly enlightening and provide a compelling case for the compatibility of Islamic economic principles with modern financial systems. Your valuable insights have significantly contributed to the understanding of Islamic Economics and its relevance in today's world. Thank you for your outstanding work on this important subject. Warm Regards, Waqas Ahmed