{Writeup/Video: bit.ly/cie2cri} While the first generation of Islamic Economists saw it as a revolutionary alternative to capitalism, the 2nd generation thought of Islamic Economics as a variant of capitalism. They attempted to "Islamize" capitalism. This is impossible because capitalism is built on foundations of overproduction and overconsumption, and focuses on acquistion of pleasure and wealth in this world. These values are strongly opposed to Islamic ones and the two economic systems cannot be combined. This is why 2nd generation attempts to create Islamic Economics failed, leading to a crisis.

1. CIE2 Is There a
Crisis?
Section 2 of “The Crisis in Islamic
Economics: Diagnosis & Prescriptions”
Dr. Asad Zaman
For Writeup, see:
http://bit.ly/cie2cri

2. What is Islamic Economics?

3. Two Puzzles:
• The term “Islamic Economics”
came into use in 20th Century
• How can it be Islamic, if it does
not trace back to the origins of
Islam?
• WHY did the subject become
prominent in 20th Century?
To answer these questions, we must
first look at history of Western
economics.

4. What is
Western
Economics?
Answer: The Religion of Secular
Modernity

5. Emergence of
Western Economics

6. Economics: The NEW religion of
mankind!
• Economics always subordinate to politics and society, and always considered together with these
subjects.
• Karl Marx argued that economic structures strongly influence or determine political and social
structures.
• Capitalists argued that economic structures can be considered independently of political and
social institutions.

7. Global Conquest
& Colonization:
Due to freedom
from morals
All is fair in love (pursuit of pleasure)
and war!!

8. Freedom Struggles in Islamic Lands
 Emergence of First Generation IE
• Early 20th Century: 90% of Muslim Lands colonized by West.
• EWW1 & EWW2’s – sapped strength of European colonizers.
• Enabled liberation movements to succeed.
• Liberation ALWAYS requires an ideology, to sacrifice lives for.
• Post WW2, a revolutionary Islamic state conceived of as a superior
alternative to capitalism and communism.
• Founders – Mawdudi, Baqir Sadr – set out the economic basis for an
Islamic state, differentiating it from Capitalism and Communism.

9. The Turning Point: First International Conference
on Islamic Economics, Mecca 1976
Freedom from Colonizers did not lead to establishment of Islamic
States.
Liberated Islamic nations continued to have economic, political, social,
and educational structures of the West.
Efforts of Islamic leadership shifted to “political Islam” – freedom from
Westernized leaders with secular, modern mindsets.
Failure to achieve Islamic Revolution led to revised strategy for Islamic
Economics – the 2nd Generation of Islamic Economists.

10. Compromise with Western
Economics:
 Second Generation IE
• Scarcity
• Utility Maximization
• Competition
First Generation: IE is a
revolutionary alternative to
Western Economics
Second Generation: IE is a
BRANCH of Western Economics

11. Crisis of 2nd Gen IE
• Revolutionary Goals abandoned.
• Attempt to create MIX of Fire and Ice –
• Question of What is IE? No answers!
• Discipline floundering to define itself
• No textbooks
• Recent textbooks not very different from Western
textbooks.

12. Theoretical &
Empirical Failure
of 2nd Generation
Islamic Economics
45:23 Have you seen the one who
has chosen his desires as his lord?

13. Quotes
THEORY: Nejatullah Siddiqi :
The grand idea of providing an
alternative to capitalism and
socialism … has yielded to a
desire to join the flock.
PRACTICE: Sohrab Behdad on
Islamic Economics in Iran
under Ayatullah Khomeini
“It has become apparent that
Islamic Economics is not
capable of presenting a viable
social alternative.”

14. 2nd Gen IE = WE + Zakat - Interest
MEANWHILE, many revolutions were launched:
1. Behavioral Economics
2. Happiness/Welfare
3. Agent Based Models (Heterogeneity)
4. Doughnut Economics (Sustainable Development)
5. Zero-Growth Models
Lost Opportunities for 1st Generation Islamic Economics.

15. Golden Opportunity
All of the different attempts to PATCH UP and FIX conventional
economics are partial and fragmented.
Islam offers a coherent and integrated alternative.
The revolutionary vision of the 1st Generation of Islamic Economics
requires us to build a society based on cooperation, generosity, and
social responsibility – in dramatic contrast to capitalism.
This golden opportunity remains open to launch a 3rd Generation of
Islamic Economics based on going back to the ideals of the 1st
Generation.

16. Links to Related Materials
“Re-defining Islamic Economics” https://ssrn.com/abstract=2608326
Paper explains how most definitions mix Islamic and Western concepts,
leading to confusion – Proposes a purely Islamic definition.
“Reviving the Promise of Islamic Economics”
https://ssrn.com/abstract=2772981 The first generation promise a
revolution, but the second generation abandoned these ideals. How we
can go back to the revolutionary approach of the first generation of
Islamic Economists?
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