An Islamic Perspective on Governance (New Horizons in Money and Finance) by Zafar Iqbal and Mervyn K. Lewis reads like a carefully constructed dissertation setting forth a theory of justice, taxation, government finance and accountability, governance and corruption grounded in Islam. Indeed, it originated as an academic piece and is unlikely to find the wide audience it deserves in this format.
The authors cover their topic with frequent comparisons to the Western perspective, so readers from either culture will not fail to broaden their horizons. Because of its grounding in theories of justice, the book should find appeal among those in the SRI community, since both focus on “human needs,” rather than “wants,” “what ought to be” rather than “what is.”
I found interesting the observation that Christianity initially flourished among the politically disinherited. Jesus was a revolutionary but not primarily political, as in “give to Caesar what belongs to Caesar and to God what belongs to God.” In contrast, Islam was born outside the two empires of its time and created its own. Islam was the blueprint and basis for legitimization. Thus there is no separation of religion and politics in the Islamic perspective.
These origins may help to explain why Western economics take the market as the norm, with government intervention to regulate market failure and competitive equilibrium. Since there is no fundamental spit between government and religion in Islamic cultures, they may be less likely to address problems by creating new property rights (carbon emissions trading, water entitlements, etc.), instead, taking a more direct approach.
Much of the book lays out a program of economic reforms for Islamic countries, based on a blending of classical, Keynesian and Islamic views. For example:
- Fiscal austerity in state financial management.
- Tax system based on principles of equity with all current expenditures finance through taxes. (Islamic position is that governments cannot borrow on fixed interest, which shifts the burden to future taxpayers and generations.)
- Government must institute preconditions for private investment (rule of law and clear property rights)and promote private savings.
- Deficit spending for capital improvements must be restricted by “rules of fiscal responsibility.”
- Profit and loss sharing models are preferred over debt financing and internal debt preferred over external debt.
- Deficit finance proposals ought to be accompanied by repayment schedules.
- Infrastructure projects are best financed through profit and loss sharing models and zero rate loans.
- Monetary scarcity ought not to be an excuse for inaction on infrastructure in developing countries.
In the area of corporate governance, the authors seek to outline an Islamic variant that is even more consultative than SRI, that incorporates more of an ethical dimension than simple stakeholder theory and that advocates something like a rigorous triple bottom line accountability that includes religious supervision by auditors not beholden to management. Of course, the author’s recognize that any claims by an Islamic corporate governance to moral high ground “must be tempered by the practical reality of the poor record of many Muslim countries in terms of corruption and economic and public governance.”
In contrast to Western researchers who view corruption at its core as a problem of bad governance requiring institutional reforms, Islamic scholars see it as fundamentally a moral problem. The basic need is a commitment to social justice and public interest. “What is then needed is to rediscover the faith, values, egalitarianism and transparency of the early Islamic state and the early Caliphate.” Westerners look to restraining influences from outside. Islamic traditions find the source of such influences from within. The authors seek to blend both approaches.
Islam is the world’s second largest religion after Christianity with 1.3-1.8 billion adherents, comprising 20-25% of the world population. With current clashes around the world between Christian/Jewish/secular countries and Islam, it is clear that increasing dialogue on the central issues of politics, economics and corporate governance is one of the critical tasks of our times. Zafar Iqbal and Mervyn Lewis have made an important and timely contribution to that effort.