Islam and Capitalism

Muslim society today has been accepting democracy and human rights values, they have not yet accepted capitalism. It is easier for Muslim society to accept the concept of freedom in politic, rather than the concept of freedom in economy.Luthfi viewed several factors behind Muslim society’s antagonistic behavior against capitalism. First, bitter experience of colonialism that is regarded as the implementation of capitalistic economy. Second, materialistic behavior is regarded as part of capitalism and therefore dangerous for Islamic faith that emphasized on life after death. Third, capitalism is assumed for endorsing hedonism, which is inappropriate according to the tradition of Muslim society. Fourth, capitalism is blamed for the social gap and economic breakdown among Muslim society. Furthermore, capitalism is regarded to be socially insensitive. Assyaukanie viewed these conclusions to be over simplification and misleading.

Based on Maxime Rodinson’s work Islam and Capitalism, Assyaukanie argued that the Muslim world is actually closer toward capitalism rather than socialism. Rodinson, by using Max Weber’s theory of sociology, found that for some extend the religious awareness aspects of Protestantism, as well as Islam, were influential upon the rise and development of capitalism. Islam arrived among Arab society who practiced commercial capitalism therefore it is easy to find commercial terminologies in the Qur’an such as “Hal adullukum ala tijaratin….” (would you like me to tell you about trade… )

Rahardjo observed that although Islam was born in the context of capitalism, Islam also contribute criticism and suggestion upon it. Therefore, the relation between Islam and capitalism is not static one. Islam introduced two models of economy, financial and human economy: “Wajahidu fi sabili bi amwalikum wa anfusikum” (fight in my way by your wealth and soul). Rahardjo viewed that this principle is in line with capitalism, just as Harold-Domar’s theory of growth explained about two capitals in economy: financial capital and human labor. But socialism also emphasized on mode of production which relied on production force as well as social relation of production.

Rodinson observed that Islam developed from a traditional capitalist society. History recorded that Islam expanded across the world using the vehicle of capitalism and trade. That is why the Islamic expansion was 300 years slower than the expansion of Muslim sultanate’s political power. This argument rejects the thesis saying that Islam is propagated by sword and blood.

Rahardjo argued that the ethic of Islamic economy is in line with the norms of capitalist economy. The advancing ethic of work, wealth and property, trade, finance, industry and technology during the Islamic golden period proved that the capitalist norms had developed within the tradition of Islamic economy.

However, Rahardjo restricted the compatibility between Islam and capitalism only in the traditional or commercial capitalism. Meanwhile, capitalism in the modern form such as state capitalism, financial capitalism, or monopoly capitalism requires explanation that is more careful. The compatibility between Islam and capitalism is very serious matter since both have rich variants. Which Islam and capitalism we are talking about?

In the end, Rahardjo asserted that the existence of capitalism and its variants is a necessity. There is no single state or society which is detached from this system, be it in traditional phase (commercial), political, or rational one (using Max Weber’s category). In Soviet Union and China, it is the failure of state capitalism instead of the socialist economy. Socialism has never collapsed since it actually has never emerged. In the end, capitalism is being a sort of natural law along with the development of its variants.

Second Day Discussion: Islamic Economics and Capitalism
Teater Utan Kayu, Jakarta, 25 March 2009

On the second day, 25 March 2009, the discussion is more about the concrete issues, namely relation between Islamic economics and capitalism. About 80 participants attended this session. This session wanted to answer the question whether the global crisis is due to fundamental failure of capitalist system therefore it must be replaced by an alternative system or it is only due to peripheral mistake on its features. M. Ikhsan Modjo (alumnus of Monash University, Australia) and Bachtiar Firdaus (DPP PKS, alumnus of National University of Singapore) were the source persons of this topic.

Ikhsan Modjo from Institute of Development of Economics and Finance (INDEF) assumed that the most appropriate theory to explain today’s global crisis is Joseph Schumpeter’s theory of creative destruction. The ongoing crisis of economy is an ordinary part of creative destruction process and a natural manifestation of the inherent nature of capitalism that tries to maximize benefit throughout innovations.

If the ongoing creative destruction process is rejected, the crisis will become problematic. Ikhsan viewed that the most reasonable solution is not to replace the capitalist system with Islamic economics, but rather to find a space that enables a synthesis between both. Several similarities and distinctions between both systems appeared during comparative observation on the conceptual and practical level. On conceptual level, Islamic economics is very similar to capitalism in terms of relying and endorsing market mechanism as the medium of allocation and distribution of economic resources. In terms of market mechanism, both systems require the existence of balanced power among market actors and the extinction of unfairness such as manipulation and cartel’s collusive behavior on prices. Unlike socialism, Islamic economic as well as capitalism respect the individual property rights.

The most obvious distinction between Islamic economics and capitalism on the conceptual level is Islamic firm prohibition over five matters: usury (riba, additional value of money), prohibited commodities (haram), speculation (maysir), uncertainty (gharar), hoarding goods and profiteering (ihtikâr). Islamic economics prohibited the profit taking from money exchange and borrowing. One is allowed to take profit from the money only if he or she participates in the real business and shares the risk of financial loss. The objective behind the Islamic legal distinction between public good and services trade activity (real sector) and money trade activity (financial sector) is in order to endorse the development of real sector rather than financial one.

However, on practical level, Islamic economics also faces the same problem with capitalism in terms of implementation of its ideal concepts. The largest criticism against Islamic economic is the huge portion of purchase and selling based financing scheme (murâbahah), than any other schemes such as mudhârabah, musyârakah, salam, ijârah, or hiwâlah. The calculation of profit margin is similar to the interest in terms of giving a fixed income. The Islamic bank is regarded as seller whereas in practice it did not operated likewise.

Observing the fact that both systems have some defects on the practical level, both speakers agreed that the most appropriate solution is to find a synthesis instead of mutual negation. The academicians and actors of Islamic economics face a big challenge to create theory, policy recommendation, and economic institution that is applicable in the mixed practice of Islamic economic system and the conventional one. Many Islamic economic theories based on the assumption of free interest in a comprehensive Islamic setting. These theories and assumptions were very unrealistic and therefore were not able to be used to analyze the reality.


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Hoping on Liberal Islam

Lately, a community named their selves as Liberal Islam was born in Indonesia. They are youngsters, activist of Paramadina, NU, journalism, and IAIN (Institute of Islamic Studies) Ciputat. In its second level, there are activist of 1980ies study groups who took doctoral degree in US, or being journalist and researcher.
This group is crystallized by having homepage and internet discussion, making network trough newspaper and radios.

The particular thing from this network is its Islamic views which represent Liberal views. Their concept regarding Islamic sharia, Koran, secular state and Jakarta’s charter is very much different to the mainstream one. From democracy political interest, Liberal Islam community gives a new hope. This community becomes a synthesis between democracy principles and Islam. They interpret history and Islamic doctrine in order to be parallel to principle of democracy and modern cultural plurality.

If this Liberal Islam community and its Liberal Islam platform develop, they will change what has been stereotyped in Islamic and democracy studies. Islam has been considered as the hinder of democracy. There is no democratic country consolidated in the muslim majority country. But Liberal Islam community can be a deviating embryo from the stereotype.

In exploring relation between democracy and religion in general, there are studies about four religions: Protestant, Catholic, Confucius, and Islam, just as Huntington did. He wanted to disclose religious contribution upon democracy. Huntington had a positive attitude toward religion. Even the history proved the present of religious interpretation hindering democratization, he opened possibility of the birth of new interpretation among religious scholar.

To Huntington, Protestant painted the first democracy wave, since 1820-1920ies. Undemocratic country was dominated by Protestant, from the North America to Europe.

Protestant teaching upon individual awareness and autonomy, like individual access to contact the Creator directly is compatible with the thought of individual sovereignty in democracy system. The Protestant church is structured democratically as well by emphasizing the wide participation (supremacy of the congregation). Besides, as written by Weber, Protestant ethic has supported the growth of capitalism and economical welfare.

Catholics painted the third wave of democracy, since 1970ies up to now. Democratic country in this period from Portugal, Spain, South and Central America, Philippine, Poland and Hungarian are dominated by Catholic.

Relation between Catholic teaching and democracy is very particular. Before 1960ies, Catholic was considered as anti democracy, furthermore as compared to Protestant. But religious interpretation changes fundamentally since Pope John XXIII which was known as the second council of Vatican, 1962-1965. Vatican II emphasized on the urgency of reverends and disciples to be involved socially to help the poor. The reverends have to admit individual rights and take out legitimacy upon injustice and authoritarian government. This new interpretation gave a very significant cultural basis for democracy.

Confucius has exceptional problem with democracy. Various new prosper countries in Asia like South Korea, Taiwan, Thailand, Singapore and China which is dominated by Confucius, is not heading for democracy. Some elements of Confucius interpretation are the reason. It emphasizes more on collective interest than individual right, authority than freedom, and duty than right.

While Islam, conceptually, teach many progressive principles of democracy, justice and economical progress. Principles like egalitarian, individual sovereignty, piety, hard work and spirit of science seeking, are numerous in its holy book.

The problem occurred in practical field. A wide distance between Islamic doctrine and its civilization happened. Hence, countries dominated by muslim from Middle East to South East and East Asia has never experienced a long and stabile democracy.

But the chance always opens, where the muslim reformer respond interpretation which has been deteriorating its disciple and change it with a compatible interpretation to democracy. It is easy since the basic element of democracy like deliberation, control and consultation is certainly its core teaching. Liberal Islam community is expected to be the pioneer of cultural supports on democracy trough the reinterpreted Islam.

The first thing should be done by Liberal Islam community is making a blue print which must be promoted among society. In this blue print, the principle of democracy and the neutral state is explained; supported not only by Islamic history, but by the Islamic doctrine itself. Liberal Islam community should have its own think-thank which is strong and having commitment. The history will prove whether this liberal Islam community would grow large, or die in the middle of way.

by: Denny JA, PhD

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Dialog, not Confrontation......????!!!

Many things are regretable subsequent to the occurrence of the gloomy Tuesday, or September tragedy at the World Trade Centre in New York and at the Pentagon. Firstly is the revival of the old “sense” in the westerners’ consciousness generally; a sort of a bad presumption about the Muslim world. As described by Edward Said, a Christian Palestinian, in his classic book, Covering Islam, there is the tendency to “generalize” about Islam and Muslim without looking at the soft and small nuances within the real life. From time to time, such presumption resurfaces. It is like a virus which sometimes sleeps, but never truly dies.
Whenever a tragic event occurs in the Muslim world or in the Western world, such presumption reemerges.

A member of the National Security Council, Peter Rodman, wrote in the National Review on 11th May 1992: “Yet now the West finds itself challenged from the outside by a militant, atavistic force driven by hatred of all Western political thought, harking back to age-old grievances against Christendom”. An article with similar tone suddenly reappeared in the daily The New York Times on 16th September 2001: “The airborne assault on the WorldTradeCenter and the Pentagon is the culmination of a decade-long holy war against the United States that is escalating methodically in ambition, planning and execution.”

The word “Christendom” and “holy war” used in both articles seems to show that there is “a holy war” going on between the West and the outer world, especially the Muslim world. However I should highlight that the word “Crusade” and “holy war” are often used by western writers in their common definition, without any religious content. When the controversy on abortion occurred in America several years ago for instance, the advocates of abortion were illustrated as the party performing a “crusade” against the embryo’s life. A title for a book written by Charles A. Scontras about the children labor is an interesting example, In the Name of Humanity: Maine’s Crusade against Child Labor. Of course the word “crusade” here has nothing to do with the crusade in the Middle Age between Muslims and Christians.

The same thing happened in Islam. When the plan of a revenge attack against Afghanistan was announced by President Bush, the reaction of (some) Muslim communities was a call for “Jihad” against America. Even at a worse level, some of them wanted to “raid” foreigners -particularly Americans- in Indonesia. Some Islamic groups created the image as if a total confrontation was occurring between the Muslim world and the Western Christian world. The theory of the “clash of civilization” conveyed by Samuel Huntington was suddenly quoted everywhere.

Yet, we know that such an impression is not true. There is an attempt to build a bridge through an interfaith dialog. The “dialog of inter-civilization” is even more common than the “clash of civilization”. Many Muslim students go to Western countries each year, to Europe, America or Australia, to study “secular” science in those countries. We have to admit that most of people who “attack” the West were the alumnus of those countries’ universities. Many Western scholars also go on “intellectual” visits to Muslim countries annually. The attempt to show Islam in various faces and aspects is also done by scholars, journalists and so on.

We remember the attempt of the President of Iran, Ali Khomeini, who campaigned for an inter-civilization dialog as an attempt to prove that “clash” is not the only possible way. Apart from several bad presumptions underlying the Western media’s consciousness of the Muslim world, as discussed critically by Edward W. Said in his book Covering Islam, we should not forget several “good intentions” of the Western scholars to understand the Muslim world as well. I thinkthe best seller book: History of God written by Karen Armstrongis a good example. Popular books written by American anthropologist named Elisabeth Warnock Fernea is another example. Fernea wrote a best seller book about Iranian people by the title Guest of the Sheik. She also wrote two other books, Street in Marrakech and In Search of Islamic Feminism. With her anthropologist husband, Robert A. Fernea, she wrote a witness of living “within” muslim community in Middle East, The Arab World: Personal Encounters.

The famous as well as the mostly misunderstood name in the muslim world is John L. Esposito who wrote four volumes of The Oxford Encyclopedia of the Modern Islamic World, an important source for Muslim and Western scholars in general. With several intellectuals in Georgetown University, Esposito established the Center for Muslim-Christian Understanding. In this centre, several famous scholars are assembled like John O. Voll, Yvonne Yazbeck Haddad, and a Malaysian intellectual, Osman Bakar. Georgetown University was established by the Catholic Church in Washington, DC.

The establishment of the Center of Muslim-Christian Understanding in a University of the Catholic Church is an interesting example, since it shows that dialog between both religions is possible, and it is necessary. It’s interesting that since spring 1999, Georgetown University has appointed a “chaplain” for muslim students in that university. A “Chaplain is similar to an “imam”. This position is occupied by Jordanian ulama, Imam Yahya Hendi.

This does not mean that there is no problem with the US foreign policies towards the muslim world. A paradox which often perturbs many people is the US campaign to disseminate ideas about democracy and human right, while giving unreserved support to the Kingdom of Saudi Arabia which often violates its citizens’ civil rights. The unfair and discriminating US policy regarding Palestine is the source of annoyance and hatred toward the US government in Arab regions. However, mixing the American government and American citizen is improper. Not all American citizens agree upon its foreign policies, hence the “sweeping” upon Americans in Indonesia is unreasonable.

Such sweeping supposes the presence of an equal vision between the government and its citizens, which is not the case. The condition post 11th September tragedy is regrettable, since it seems that the inter-civilization dialog is impossible. It seems that there is a big gap between “West” and “East” which is hard to bridge. People who assume that the world is formed by two contradictory blocks -good and evil blocks- are benefited by such condition. The black-white view is easy to accept since such a view is the simplest to absorb by uncritical thought.

What has been forgotten by many people is what is called as “West” and “Islam” which never have a clear and precise definition. Which part of West? In its popular definition, West often identified to European and American. Obviously there is a big distinction between nations living in both continents. We know that America is a federal country, with a range of societies having various views. The clearest tendency in American society is the strong spirit of “anti-state” because of the historical heritage of Europe where state is identical with oppressive imperial power supported by the (Catholic) Church. This “anti state” ethos explain the strong spirit of federalism in that state, and hatred for centralization. That is why America which is very “imperial” is not accompanied by the “imperial” awareness of its citizens. American people, in my impression, do not care about matters regarding their government’s foreign policy.

This explanation indicates that it is wrong and improper to suppose the Western people as something clear and single; that American society is identical with its government; and that American society is a set of people with a homogeneous opinion.

It is similar to Islam. What is called as “Islam” with a big exclamation mark is not as obvious as they assume. Since eventually, the definition of Islam is a social definition. Islam is not one uniform entity. It is impossible to say about the confrontation between “West” and “Islam”, which Islam? We know that Muslim’s opinion regarding WTC and Pentagon tragedy varies. If we suppose that by such tragedy Islamic world has “incited the spirit of jihad” versus America as often stated by the preachers, which Islam do they mean?

Another misunderstanding is the one about Afghan people-Taliban Government-Afghanistan Country-Islam. Since the majority of Afghan people are Muslim and governed by the Taliban which enforced Islamic sharia, hence the US invasion upon Afghanistan was an invasion of Islam and it should be resisted. But considering such attack as the attack upon Islam is a messy attitude. Deep sympathy must be given to the Afghan people who suffer due to internal conflicts approaching the Soviet Union’s invasion on 1979, due to the invasion itself, due to civil war post the invasion, and due to the repressive policy of Taliban government which eliminate the civil rights of its citizens. The Government of Taliban’s policy carrying tragic consequences on women obviously can’t be considered as “Islamic” (see http://www.rawa.org). It’s regrettable if the Taliban rulers are considered as the representatives of the Muslim world as their treatment of their citizens is against the prophetic values of Islam.

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Dialog is the only possible road to take currently. Confrontation will only benefit people who have polar views regarding life: “Islam” and “infidel”, good or bad and etc. This way will only benefit the conservative and extreme people of any religion. This way also will benefit any religious elites who will manipulate their community’s ignorance for their own interest.



by: Ulil Abshar-Abdalla

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Democracy and Religious Radicalism

The radical religious movements in Indonesia are being born at the same time as the democratisation process is emerging. For instance, regional autonomy as the reflection of democracy, has resulted in the revival of the will to implement Islamic Sharia. In several regions such as West Sumatera, Aceh, Makassar and Cianjur, a number of regional regulations (Perda) have been arranged for implimenting Islamic Sharia. The emergence of the radical Islam social organizations on a massive scale as the part of a social movement has also occurred in tandem with the democratisation since May 1998, although its seeds were sown long before.

John O Voll, Professor of history at Georgetown University US, has an interesting conclusion regarding the relation between Islam, democracy and terrorism He conveyed this in a discussion about ‘Democracy and terrorism in Muslim countries” at Jakarta several days ago. According to him, the relation between democracy and terrorism in the Muslim countries indicates a paradox. On one hand, the absence of democracy leads to the emergence of terrorism, but on the other hand, the presence of democracy could deliver terrorism as well. Even though it is admitted that terrorism is not an Islamic characteristic and can be performed by anyone besides Muslims, but the assumption that democratization process could eliminate the religious radicalism such as terrorism is invalid in the Muslim countries, because the democratization process in Muslim countries does not eliminate terrorism automatically. (Kompas, 15/01/2002)

John O Voll’s thesis is based on a deep understanding of democratic developments in various Muslim countries. Therefore his conclusion’s offer important truths. The democratisation process has not eliminated terrorism automatically, and has even been used as the inspiration for the resurgence of religious radicalism. In many Muslim countries, the religious radical movements are born during the democratisation process and Indonesia might become a good example of this.

The radical religious movements in Indonesia are being born at the same time as the democratisation process is emerging. For instance, regional autonomy as the reflection of democracy, has resulted in the revival of the will to implement Islamic Sharia. In several regions such as West Sumatera, Aceh, Makassar and Cianjur, a number of regional regulations (Perda) have been arranged for implimenting Islamic Sharia. The emergence of the radical Islam social organizations on a massive scale as the part of a social movement has also occurred in tandem with the democratisation since May 1998, although its seeds were sown long before.

How could this be explained? Democracy ought to make the social order more liquid, egalitarian and inclusive, but the facts show the contrary. Democracy in Indonesia is even congealing tribal and religious identities, religious diversity is being exploited, religious exclusivism is emerging. Surely this is counter-intuitive to the expectations of the democratisation. This phenomenon is like the “illicit child” whose birth is unexpected and cannot be prevented. Even killing the “illicit child” would be considered as a crime. The “illicit child” of democracy in the form of religious radicalism will become a threat to democracy.

A democracy that protects freedom of speech, thought and expression cannot impede society’s aspirations whatever the form. Like it or not, democracy cannot stifle thoughts that are themselves against democratic values, because stifling them is against the meaning of democracy itself. The mature democratic countries show that the full variety of ideologies and thoughts are protected by the state. But here is the problem, because democracy is impotent in facing religious radicalism. The democratic mechanism can only allowing radicalism to compete with other notions and ideas.

The fact that religious radicalism’s revival is often wrapped in democratic cloth is unsurprising though it is actually paradoxical to the democratic spirit. The struggle of enacting Islamic Sharia in some regions, the spirit to revive Jakarta’s Charter for instance, emerged in the name of democracy and liberty. Democracy could even be swallowed by its own freedom such that there is possibility that a nation could even fall into new forms of authoritarianism. This obviously is very dangerous because the new authoritarianism wears a democratic cloth.

From this perspective we can explain why the development of democracy in the Muslim world is always deficient as shown in the survey performed by Freedom House, a research institution at the United State. The survey at the end of 2001 concerning the freedom score for many countries showed that freedom and democracy in the Muslim countries scores very low. Out of the 47 Muslim majority countries, only 11 countries have governments that have been elected democratically. Meanwhile, in the 145 Non-Muslim countries, 110 of them have joined the electoral system. Freedom House’s score issued every year shows little significant change in the Muslim countries.

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There is a significant questionat hand: Is there something “wrong” in the Muslim countries, so that democracy and freedom is always stagnant or non-existent? Even while democracy develops, radicalism off all sorts emerge, especially religious radicalism. Why so? There is a good explanation from Samuel P Hutington (1991) . Beside the economic and political factors, cultural and traditional factors become the most important obstacles for the democracy’s growth in a country. Society’s culture and tradition – regarding attitude, value, trust and behaviour influence democratic development. A society’s culture which is undemocratic, originating in cultural as well as religious understanding, blocks the spread of democratic norms in the society and does not give legitimacy to democratic institutions and their function.

At least there are two versions regarding this culture. Firstly, a restrictive version, which declares that it is only the western culture which is the appropriate context for the dissemination of democracy. Countries, which have no western culture, are not able to become democratic. This argument emerges due to the fact that modern democracy started in the west; hence since the beginning of the 19th century, the biggest democratic states are the western states.

Secondly, there is a less restrictive version which states that it’s not only specific cultures that uphold the democracy. Confucianism and Islamic culture in the East could become fields of democracy. Confucianism was considered as anti-democratic and anti-capitalist in the 1980’s, yet Confucianism has been able to support democracy and also the tremendous economic growth in East Asian society. Similarly Catholicism as compared to Protestantism was seen as an obstacle to democracy and economic growth. But in the 1960’s and 1970’s Catholic states become democratic and achieved higher economical growth than the Protestant states.

Observing those facts then, as far as it regards religious teaching and tradition, the conditions for the emergence of democracy cannot be see as black and white, “appropriate” and “inappropriate”. Culture and tradition, trust, doctrine, assumption, behaviour and etc., all are very complex phenomenon.

Besides, the culture that later delivers tradition is not something finished, but always in transformation. Therefore, a tradition that is claimed formerly as democracy’s obstacle, in the next generation could be the opposite. Spain is a good example of this. In the 1950’s, Spanish culture was illustrated as traditional, authoritarian, hierarchical, and very religious. But in the 1970’s those values lost their place in Spain. Therefore culture is always evolving and its most determinant factor is economic development. With this explanation obviously the factors of culture and tradition factors cannot be used as permanent arguments to justify the retarded democratic level of certain states.

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The emergence of religious radicalism is caused by three factors. Firstly, disappointment toward the democratic system considered as secular, where religion has no space in the state. Religion is a private matter that cannot be interfered in, while the state is a public matter. The democratic teaching that placed the people’s voice as the God’s voice (vox populi vox dei) is considered to be subordinate to God. Therefore, religious radicalism movements usually take the form of Islamic state struggle, theocracy or Theo-democracy in al-Maududi’s terms. Although the radical group are disappointed with the democratic system, they utilize democratic momentum to struggle for their political aspirations.

Secondly, disappointment toward the social system’s collapse is caused by the state’s powerlessness to manage society’s life religiously. In the Islamic context, this kind of religious radicalism usually take the from of Islamization of social systems by enforcing strict controls over social activities considered as maksiat (sinful) or as violating religion. This kind of radicalism can be expressed in the form of the destruction of places destruction, prostitution, gambling etc.

Thirdly, political injustice. Religious radicalism can appear as a form of resistance toward political systems which are oppressive and unfair. In the case of a group which is incessantly oppressed and treated unfairly, its internal solidarity allows for a militancy to emerge. This kind of radicalism usually takes the form of opposition toward the government in the name of religion.

Religious radicalism emerged in Indonesia as a variation and mixture of these models considered above. In a democratic state, religious radicalism, as long as it does not result in social anarchy, should be given a space of expression. Therefore, the question of the role of the state is not about how to stifle that radicalism, but how to channel it through political institutions. If that is done, religious radicalism can still be be controlled within a democratic frame.


BY: Rumadi
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