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Wednesday, 2 November 2011

Economics Guidelines and its Analysis


The research work Dr. Muhammad Masood Ahmad has done on Imam Ahmed Raza al-Qaadiri Bareilly is well known.  In the course of his research work Dr. Masood Ahmad focused his attention on his Economic Guidelines of Imam Ahmed Raza al-Qaadiri which he enunciated in his pamphlet “TADBEER-E-FALAH-O-NIJAT-WA-ISLAH” which was published from Calcutta in 1912/1331 AH.  The details of these guidelines are as follows:-
1)   Excepting those matters in which the state is intervening, the Muslims should settle their conflicts by mutual consultation, so that thousand of rupees which are squandered in unnecessary litigation may be saved.
2)   The rich Muslims of Bombay, Calcutta, Rangoon, Madras and Hyderabad-Decan should set up banks for their Muslim brethren.
3)   The Muslims should not purchase anything from non-Muslims.  They should have business dealings with Muslims only.
4)   They should be emphasis on the spread of Ilm-e-Deen (Islamic Teachings).
Apparently these four points or guidelines are brief but Dr. Masood Ahmad has entrusted the task of elucidating these guidelines to me as a humble student of Economics.  This task is stupendous.  Despite my twenty years teaching experience, I think my knowledge is limited.  In spite of my limitations, I have made up my mind to explain these guidelines to the best of my ability. Allama Iqbal says: Indeed these are the guidelines of a Mo’min who was saturated with the love of the Holy Prophet.
Before discussing these guidelines, I would like to say something by the way of Preface. In 1912 when these guidelines were published, the study of Economics as a distinct subject was not common.  In other developed countries of the world like England, America, France, and Germany a special group of intellectuals was engaged in acquiring knowledge of Economics.
There is no doubt that regular books on Economics were being published, but the masses were not interested in this subject.  The students used to avoid this subject, considering it to be dry.

The tremendous increase in the importance of Economics after the First Great War and particularly the Great Depressions of 1929-30 is unprecedented in the history of development of social science.  The number of students of Economics in American University and colleges was very small.  The girls particularly avoided studying Economics.  But after 1940 the conditions changed radically and there was a great increase in the number of the students of Economics.  Now the American experts are thinking of introducing the study of Economics at the primary stage.
It goes without saying that the Great Depression (1929-30) gave a great impetus to the study of Economics in the masses and the Governments.  The classical theories existed for the control of depression, but the Great Depression falsified these theories.  The need was felt for a new theory, which could help in combating depression.  In 1936, J.M. Keynes, a British Economist published his book, “THE THEORY OF EMPLOYMENT, INTEREST AND MONEY” which triggered a revolution in Economics thinking in the world.  Keynes theory enabled countries to overcome slump and depression.  Keynes was made a lord in recognition of his new theory.
The readers should note that the new economic theories were developed after 1930.  It is rather surprising that Imam Ahmed Raza al-Qaadiri anticipated the new economic developments in 1912.  If rich Muslims had paid attention to the guidelines of Imam Ahmad Raza al-Qaadiri since 1912, the economics condition of the Indian Muslims would have improved a lot.
Now let us discuss these guidelines in detail.  In my opinion the first three guidelines are concerned with the spirit of new economics and the fourth one is concerned with the spread of Islamic Studies.

First Guidelines

Excepting those matters in which the Government intervenes, the Muslims should settle their disputes by mutual consultation so that thousands of rupees which were spent on litigation may be saved (for economic development).

The key point in this guide-line is saving.  Our Holy Prophet e condemned prodigality over 1400 years ago.  The Modern economics condemn loose spendin; they emphasize that unproductive expenditure is fruitless.  If we study the economic life of the Indian Muslims in 20th century prior to the establishment of Pakistan, it will become crystal clear that during that period the Indian Muslims squandered thousands of rupees in litigation.  The Muslims constituted only 14% of the population of the UP.   They were well to do Muslim Landlords (Zamindar) but litigation was their popular past time.  One of my near relatives who was a zamindar used to visit us over a period of twelve years in connection with litigation with his brother-in-law.  After partition of India into Bharat and Pakistan, Vallabh Bhai Patel abolished zamindari and ruined the Muslim zamidars.  Then agrarian litigation died a natural death. 

The first guideline makes it clear that Imam Ahmad Raza al-Qaadiri did not like expenditures on litigation.  Litigation sowed the seeds of discord among Muslims.  Secondly, the millions of rupees which were spent on litigation,if saved, would have ameliorated the economic conditions of the Indian Muslims. These expenditures were unnecessary.  Litigation could be avoided if the spirit of consultation and cooperation was allowed to prevail between the disputants.  In that case the money of Muslims would not have enriched others.

Imam Ahmad Raza al-Qaadiri stressed the need for savings in 1912, because he was sure that it was the best means of removing the poverty of Muslims.  He advocated curtailing unnecessary expenditure and using the money thus saved on the economic rehabilitation and welfare of the Muslim masses.  In 1936 Keynens enunciated his theory of employment and money, and strengthened the foundations of a new or macro-economics.  The most important variables of his theory are savings and investment.  He maintains that to secure equilibrium in the economy, savings and investment should be equal.  If there is dis-equilibrium in the two variables, the economy will become prey to slump or inflation and both these situations are harmful from a political, economic, inflation, and social point of view.  The great depression of 1929-30 exploded the Governments policy and laissez faire was falsified by economic fluctuations.  Keynes advised the Government to fully intervene in the economic affairs of their respective countries to check slump and bring about quick economic recovery and prosperity.  So the Governments took full part in economic rehabilitation and development and thus trade cycle was curbed.

The present is the epoch of economic planning.  USSR is the pioneer in the field of economic planning in the world.  The plans are generally drawn for 5-year periods.

Now backward and under-developed countries are engaged in economic planning through the five-year plan.  The funds for the completion of plans are derived from two sources:

1)   National savings.
2)   Loans. If national savings are inadequate, the developing countries have to depend on foreign loans and grants.

The third method, of financing the development program consists in the issue of inconvertible currency notes by the Central Bank of the country.  But this method increases inflation which if uncontrolled results in economic crisis or depression.

So the easiest and the best way is to encourage national savings.  The level of savings is low in the developing countries because the income of people is low.   Moreover if there is an increase in individuals income, it is spent on procuring durable consumer goods.  According to an estimate of the economist the rate of saving in most of the under developed countries is 5 to 8 percent, whereas in developed countries it ranges from 15% to 18% of the national income.  The developing countries should augment their savings to 15% to accelerate the pace of economic development.

We have already seen that according to Keynensian equation S=I, if savings are increasing, then investments will also increase.  In 1950, Colin Clark an American Economist suggested that Bharat, China and Pakistan each should save 12% of their national income for economic development purpose.  The developing countries including Pakistan are floating various savings schemes to accumulate funds for economic developments.  National saving is the key to economic development.

Now the discerning minds should keep in view this environment.  In 1912, Imam Ahmad Raza al-Qaadiri had advised the Muslims to shun unnecessary expenditures and save as much as possible.  At present, the Government is also urging the people to save to the maximum limit.  Now, would you not recognize the economic farsightedness of Imam Ahmad Raza al-Qaadiri?  Would you not be convinced of the fact that the discerning eyes of Imam Ahmad Raza al-Qaadiri were visualizing the future very clearly.  Keynes won the title from the British Government for discovering a thing which Imam Ahmad Raza al-Qaadiri had already published in 1912.  It is a pity that the Muslims did not pay any heed to this fact.

Second Guideline

Now let us come to the second guideline.

Imam Ahmad Raza al-Qaadiri said the rich Muslims of Mumbai, Calcutta, Rangoon, Madras and Hyderabad, Deccen should establish banks for their Muslim brethren.

This guideline is so important from the economic point of view that we can not help recognize the economic insight of Imam Ahmad Raza al-Qaadiri.  In 1912 there were a few banks in the bigger cities of India.  The English or Hindus owned them.  Up to 1940, there was no Muslim Bank in India.  It was not an easy task to assess the importance of banks in 1912, but importance of these future financial institutions could not escape the attention of Imam Ahmad Raza al-Qaadiri.  So he appealed to the affluent Muslims to set up banks for the Muslims.  It goes without saying that Imam Ahmad Raza al-Qaadiri aimed at banking without interest or interest-less banking.

The banks play an important role in sustaining the economy of a country.  Credit is the life blood of commerce and the banks provide it.  The banks collect the small savings of the people and make them available for investment in productive channels.  We cannot think about a viable economy without banks.  That is why the present economic system is called the compound interest system i.e. a system based on compound interest.

Finance holds the pivotal position in economic planning.  No economic plan, whatever its size, can be completed without funds.  It is the duty of the banks in a planned economy to minimize the paucity of funds from the economy and encourage investments.  The banks perform two functions:

1)   They collect large and small savings of people.
2)   They lend these funds to those persons who invest them in productive channels i.e. in the production of such goods and services as assist in the production of wealth in the future.

Thus the importance of banks in the modern era is well established.  Quaid-e-Azam was a farsighted statesman.  He realized the importance of a Muslim bank for the economic development of Muslims long before establishment of Pakistan.  He deplored the absence of Muslim banks.  Being moved by the persistent exhortations of Quaid-e-Azam, Sir Adamjee Daud and Mirza Ahmad Isphani who were counted among the leading capitalists of the undivided India, set up the Muslim Commercial bank, in Calcutta on the 9th July1947.  After partition of India the Head office of this band transferred to Pakistan.  At present, this bank is playing an important role in the economy of Pakistan through its numerous branches.

The modern financial experts have enumerated two types of savings,
1.   Savings and
2.   Hoarding.

If an individual saves twenty rupees out of his monthly income of Rs100- his monthly saving will be Rs20-.  Similarly, the nation saves.  If national income exceeds national expenditure, the result is national saving.

The individuals can deposit their savings in the banks or invest them in some National Saving Scheme.  This is called saving proper.  But if the persons keep their savings to themselves, it is called Hoarding.

As long as persons deposit their savings in banks or invest them in some national saving scheme, the economy will remain balanced.  But in the case of hoarding of savings, the economy will become unbalanced.  As Keyne’s equation’s saving = Investment will be disturbed, the economy will become prey to inflation or slump.  It will increase unemployment and unutilized economic resources.  This will result in several social evils.

At present the importance of savings and banks has become universal.  In 1912 when economic literacy was very low, who knew that after 30 or 40 years savings or banks will acquire so much importance.  Imam Ahmad Raza al-Qaadiri had peeped into the future.  He not only advised Muslims to refrain from prodigality, but also persuaded them to save.  He also appealed to the rich Muslims to set up banks in which the Muslims could deposit their small savings and wherefrom the accumulated funds may be lent to the competent Muslim Industrialists so that they could compete with the Hindu Industrialists in the industrial and commercial fields.

Pakistan came into existence on 14th August 1947.  The Hindus were sceptical about its economic viability. It was a fact. The Pakistan treasury was empty.  The Muslims had no experience of industries and banking.  There was and economic vacuum which had to be filled despite the odds.  Gradually with the grace of Allah I the difficulties were surmounted and Pakistan was put on the road to development.

I think that in 1912 if some farsighted Muslims had acted on the advice of Imam Ahmad Raza al-Qaadiri then the economic history of the Muslims in India would have been different and Pakistan would not have faced such bleak economic conditions.  Such deep thinking and such guidelines, which were pregnant with far reaching consequences, were beyond the reach of an ordinary mind.  It was the feat of Imam Ahmad Raza al-Qaadiri who advised the wealthy Muslims to set up Muslim banks so as to better the economic lot of Muslims.  Quaid-e-Azam also repeated the same thing in 1946.  If in 1912 a few Muslim capitalists like Sir Adamjee Daud and Mirza Ahmad Isphani had responded to the call of Imam Ahmad Raza al-Qaadiri, the economic future of Muslims would have improved considerably.  And the economic consequence of this progress would have proved beneficial not only for the Muslims of the Indian sub-continent, but also the Muslims of the world would have reaped its benefits.
Third Guideline

Now we refer to the third guideline of Imam Ahmad Raza al-Qaadiri which is, the Muslims should not purchase any thing from anybody except the Muslims.

How important is this guideline?  Also take stock of present day world’s economic order.  It is a pity that the Muslim neither understood this golden rule, nor acted upon it.  But after the Second World War the war affected countries of Western Europe adopted it and at present these countries are most prosperous in the world.

During Second Great War, as a boy I saw the following couplet written on the shops of Muslims at Lucknow.

If the Muslim desires an honorable life in India, he should always purchase every article from a Muslim.

This couplet seemed to be an echo of the third guideline of Imam Ahmad Raza al-Qaadiri.   This couplet impressed me very much, but I saw the well-to-do Muslim purchasing various things from the shops of Hindus at Lucknow.  At that time there were economic experts among Muslims, but all of them took their clue from the western economists.  They were absolutely unmindful of the fact that one of their servants was telling them about useful economic facts but none seriously thought about the third economic guideline, nor understood it, nor sought its clarification. If some Muslim economist had explained the far reaching consequences of these guidelines, the Muslims, in India, would not have been economically inferior to other nations.

Whether international trade should be free or protected is an old controversy. Leading economist of Europe and America have advanced arguments for and against protection.  Adam Smith, the father of economics was the greatest advocate of free trade.  Free trade means that there are no restrictions on the import and export of goods and services between the various trading countries or they are nominal. On the other hand, protection consists in protecting nascent national industries against foreign competition by the Government. Adam Smith’s book An Inquiry into the wealth of nations” was published in 1776.  In 1791 Alexander Hamilton an American statesmen strongly advocated the policy of protection and opposed free trade policy.  Fredrick Fist of Germany gave cogent argument in favour of protection.  The most important argument advanced for protection is that protecting nascent industries against foreign competition.  In the absence of protection the new industries may succumb to the blast of foreign competition.  Another argument is that national wealth circulates in the country and augments business transactions.  I want to say something in the light of the third guideline of Imam Ahmad Raza al-Qaadiri.

The war of independence of 1857 put an end to the Muslim Empire in India and the British entrenched themselves in India.  By 1912, the British Empire had become very strong in India.  Nobody could think that the British would quit India after 35 years.  Now the Muslim had no regime of there own, but the Muslim nation still existed who knew what it had lost.  The Muslim leaders had to evolve suitable policies for the social, religious and economic regeneration of the Muslim.  The Muslim leaders were active in educational, political, and social spheres, but nobody did anything to remove the economic backwardness and poverty of Muslims.  At this critical juncture Imam Ahmad Raza al-Qaadiri presented his economic guidelines, but unfortunately the Muslim did not pay any heed to them.  The educated Muslims were looking towards the west for guidance.  They were oblivious of the fact that Allah I had sent a man in their midst by following whose suggestions the Muslims would have extricated themselves from penury and would have started living an honorable economic life.

In my opinion the third economic guideline is most important.  He wanted to give economic protection to the Muslims.  The Hindus were much ahead of the Muslims in the field of trade and business.  The Hindu bannias wanted to maximize their profit.  The Muslim had no business experience.  If the Muslims ventured into business, the Hindus tried their utmost to oust them from business.  Non-patronization by Muslims also hastened their ruin.  Imam Ahmad Raza al-Qaadiri knew all these trends.  The only solution consisted in the Muslims patronizing Muslim traders and shopkeepers and all business transactions should be carried out among the Muslims.  The position of the Muslim businessmen and shopkeepers resembled the nascent industry, which is to be protected against ruthless foreign competition.  The Muslims must patronize the Muslim shopkeepers who wanted to prosper in the business field.

What would have been likely economic results if the Indian Muslims had acted on the suggestions of the Mujaddid of Islam? The money of Muslims would have gone to the Muslim shopkeepers who would have made more purchases from the Muslim wholesalers.  The Muslim wholesalers would have purchased more goods from the Muslim manufactures who would have produced more to cope with the increased demand.  Economic resources like land, labour and capital are required to produce more foods.  Increased production would be provided to the unemployment Muslim labour.  With an increase in their incomes, their effective demand would have increased.  This would have brought the spiral of prosperity for the Muslims.  The question arises where the Muslim industrialists could get the capital.  The answer to this question is hidden in the first two guidelines of Imam Ahmad Raza al-Qaadiri that the Muslims should save and the wealthy Muslims should establish banks which provide funds for productive projects.

Effective demand plays a vital role in the Keynesian theory of Employment, interest and money.  And the idea of effective demand is clearly present in the third-guide line of Imam Ahmad Raza al-Qaadiri.  But entire credit goes to Keynes.  We praise the western economists while we are quite oblivious of the suggestions of our eminent servant.  It is most deplorable.

Now let us see how far the western world has acted upon this guideline of the great Mujaddid t after the Second Great War.  The countries of Western Europe like Germany, France and Italy were completely ruined due to the war.  Germany and Italy were completely destroyed.

After the European Common Market was formed between the countries of Western Europe as a result of Rome Treaty, West Germany could not rehabilitate its economy single-handed.  It was the time when the USA was dominating the world politics and the Dollar was unrivalled as the world currency.

The idea underlying the formation of the European Common Market was the same as hinted by the Great Mujaddid t in his third-guide line i.e. the Muslim should not purchase anything from any-body except the Muslim.  According to the Rome Agreement, the member countries would produce those articles in which they enjoy comparative advantage over other countries.  The member countries would deem themselves to be a unit. The trade between the member countries would be free and unrestricted.  There will be no restriction on the mobility of the factors of production.  Imports will be heavily taxed and export will be encouraged to the utmost.  Those commodities, which the member countries can produce, will not be imported from abroad.  Business transactions would be mostly amongst the member countries.

At the inception of the E.C.M even the members were not sure of its success.  But with the lapse of time this institution blossomed into a very powerful economic institution.  The economy of the members was stabilized on very solid grounds.  The financial position of members became very strong.  We saw that the position of the American Dollar in world market became less important and German Mark became the strongest currency of the world.

The phenomenal success of the European Common Market gave birth to a new branch of economics, which is called the theory of economic integration.  Much has been and is being written about it.
Being impressed with the splendid success of the E.C.M ten countries formed the European Free Trade Area (EFTA) but it could not be successful.  The agreement between Iran, Turkey and Pakistan was on the same lines but it was not successful.  A conference of the three member countries was held on April 26th 1976 in Izmeer, Turkey to make RCD a success, but so far no positive results have come to the surface.  If the three countries try to revive this institution, it can be successful to the benefit of the member countries.

The upshoot of this discussion is that if the Muslim has acted sincerely on the suggestions of Imam Ahmad Raza al-Qaadiri, they would certainly have the same success as attained by ECM.  One of our great servants had lighted the torch of economic progress.  We had to find out the path of progress in that light, but unfortunately instead of following the way shown by the great Mujaddid t, we completely ignored him.  We can ascribe our failure to follow the path shown by the great Mujaddid t to our misfortune or lack of far-sightedness.  Or the national leaders became so much engrossed with social, educational and political reforms that they did not give requisite attention to the economic rehabilitation of the Muslims, which is really astonishing and regrettable, although in 1912 Imam Ahmad Raza al-Qaadiri had shown the beacon light for the economic betterment of the Muslim community.

Fourth Guide Line
The fourth guideline of the great Mujaddid t is not concerned with economic reform, but its importance is great in itself. He said:
We should popularize Islamic learning and spread it among the Muslims

This was the period when the educational reforms of Sir Syed Ahmad Khan were influencing the Muslims who were trying to imbibe western learning.  The acquisition of the English Education was a good thing in itself.  Our Holy Prophet e has emphasized the acquisition of knowledge by the Muslim.  But the thing that was harmful and which Imam Ahmad Raza al-Qaadiri had felt that very tie was that the young generation was becoming attracted to the western culture along with English education which was highly abominable and objectionable.  Imam Ahmad Raza al-Qaadiri had realized that if the Muslims gave up religious education, they would lose their Islamic identity and individuality.  The new civilization will wreck their unity.  Their condition will resemble the following couplet.
They could neither find Allah, nor the company of HIS beloved.  They were left utterly disgruntled.

Akbar Allahabadi had felt this trend.  He admonished the Muslims through his poetry that they should not forget their real position.  Your most precious treasure is your religion and culture.  But the intoxication of reform was so deep that the Muslim did not pay any heed to this crucial problem. 

The Western civilization misguided the young men so profoundly, that they strayed from their religion, culture and society and the English succeeded in their nefarious designs.
The alienation from religion palpably jeopardized the separate identity of the Indian Muslims.  But when Quaid-e-Azam wanted to unite the Muslim on one platform in the name of Islam, they gathered like moths around him.  Islamic thinking and affinity was ingrained in the Muslim, which culminated in partition of India.

The Muslim got a new country, which came into existence because of the fact that the Muslims were a separate nation.  Their religion, culture and customs are quite different from those of the Hindus.  It is a pity that a separate state was acquired in the name of Islam, but those at the helm of affairs did not any effort to introduce Islam in Pakistan in the real sense. It was imperative to transform Pakistan into a truly Islamic state.  Islamic education should have been imparted to the young generation.  They should have been told why the Muslims of India had struggled for Pakistan and why great sacrifices of life and property were given.  But unfortunately attention was diverted from this issue.  The race for political power started.  The foundations of Pakistan had not yet become strong that the country became a prey to political turmoil.  The neglect of religion proved to be highly harmful.  We identified ourselves with provinces, forgetting that we are simply Muslims First and Last.

The basic reason behind that calamity that befell our country was our neglect of religion.  If Islamic education was stressed right from the beginning, we would not have witnessed these ominous days.  Today it is most essential to bring the strayed new Muslim generation back to Islam by means of Islamic education, Islamic culture and history.  If efforts in this behalf are initiated in the right earnest, it is likely that new generations may regain its Islamic identity.  According to Allama Iqbal This soil is very fertile, if it is slightly wet”

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