Economist Challenges Existence of Islamic Economy on Iranian TV

The concept of an "Islamic economy" has been a topic of discussion for at least 45 years.

In a recent televised debate, Musa Ghaninejad, a proponent of competitive capitalism, asked Masoud Derakhshan, a professor of economics at Imam Sadiq University and advocate for Islamic economics, to define what the Islamic economy is, highlighting the frustration felt by economists who have been grappling with this issue for decades.

Despite its elusive nature, the notion of an Islamic economy continues to cast a heavy shadow over Iran's economy, leading experts to question whether such a model truly exists and, if so, what its characteristics are.

It is noteworthy that Derakhshan, who was a student at Tehran’s Imam Sadiq University, is an educated statesman who promotes his ideas for an Islamic economy through his work in the university’s Faculty of Islamic Studies and Economics.

His ideas have provided a practical framework to transform Iran's economy.

Ehsan Khandozi, the minister of economic affairs and finance, Dawood Manzoor, head of the Program and Budget Organization, Hojjat Abdul Maliki, former minister of cooperation, labor, and social welfare and secretary of the Supreme Council of Free Commercial-Industrial and Special Economic Zones, Mohammad Rezwanifar, deputy economy minister and chairman of the Iranian customs services, Hossein Ghurbanzadeh, head of the Privatization Organization, Mohammad Hadi Zahediwafa, head of the Higher Institute of Education and Research, Management, and Planning, Meysam Pilehforosh, deputy head of the Privatization Organization, are among graduates from the Faculty of Islamic Studies and Economics at Imam Sadiq University who now hold positions in the government.

Despite the Islamization of all facets of Iranian society over the past 40 years, questions regarding the Islamic economy and its derivatives, such as Islamic banking, have remained unanswered.

In his recent televised debate with Derakhshan, Ghaninejad, one of the founders of the Faculty of Islamic Studies and Economics at Imam Sadiq University, received disappointing answers when he raised this matter.

Whatever the Leader Said

During the debate, Ghaninejad tried to define an Islamic economy by referencing the opinions of Ayatollah Ruhollah Khomeini, the founding father of the Islamic Republic. The professor of economics said an Islamic economy is what Khomeini had said about it. 

As Ghaninejad pressed for a more comprehensive answer, Derakhshan said that he supported regulating economic affairs of Muslim societies based on Islam, meaning that both the Program and Budget Organization and the central bank must act in accordance with Islamic principles.

But what does this truly mean? Is it sufficient to formulate a comprehensive economic system labeled as an Islamic economy? Derakhshan further explained that "Islamic economics entails discovering economics in its true sense."

"Although there are various definitions of an Islamic economy, it cannot simply be a collection of jurisprudential rulings, fatwas, narrations, and economic hadiths," he said. 

Derakhshan asserts that "a set of jurisprudential rulings or the introduction of economic cooperation contracts, such as the sanctity of usury, respect for ownership, rulings on options and fraud in transactions, or the explanation of mudarabah (partnership in which one party provides the capital while the other provides labor) contracts, etc.,cannot solve the problems of today's complex economies."

Instead, a school of thought or a codified and coherent philosophical system is needed for a more comprehensive Islamic economic model, according to Derakhshan. 

No News about the Islamic Economy

Although Derakhshan cited Khomeini’s words and writings to explain what an Islamic economy is, these quotes offer little guidance on how to build a comprehensive economic system.

Instead, they focus on moral recommendations and jurisprudence, which cannot provide a coherent economic framework.

Khomeini's comments on the economy emphasized the importance of independence and self-sufficiency, but provided little guidance on the specifics of a "correct" and "healthy" economic system.

He frequently stressed the need for all aspects of life in the Islamic Republic to be Islamic, including the economy.

However, Khomeini's intellectual dependence on non-Islamic schools of thought has been criticized. In a meeting with Ministry of Health and Welfare employees in 1980, he lamented the "people’s tendency to abandon their own school of thought and to adopt the ideas of others, including Marxist economics, without fully understanding their own Islamic economic principles."

How can Khomeini's description of an Islamic economy and its characteristics be improved?

In a conversation with a reporter from the newspaper Indonesian Tempo in January 1979, while he was still living in France, he was asked about the economic foundations of an Islamic regime, particularly in the banking sector, land reforms, and property rights.

Khomeini responded that ownership is accepted in Islam but that it comes with certain conditions and limits prescribed by Islamic laws and regulations. 

"This separates the economic system of Islam from the capitalist economic system of the world, and if these limits and conditions are followed, the Islamic society will not experience the same problems and inequalities found in today's capitalist world."

Ayatollah Khomeini emphasized that the economic system of Islam should be viewed as a part of Islamic laws and regulations covering all aspects of personal and social affairs.

He believed that the problems and complications in human life cannot be solved only "by regulating economic relations in a particular way.” “Instead, they should be solved within an Islamic system that takes into account spirituality,” which he considered “the key to pain.”

Ayatollah Khomeini concluded that only Islam can guide society, and if the world wants to overcome its problems, it should convert to Islam.

Khomeini's explanations about the economic foundations of the Islamic regime merely reiterate a few jurisprudence rulings on borrowing interests and property. They do not adequately establish an intellectual framework that distinguishes Islamic economics from capitalist or communist models.

To fully clarify the concept of Islamic economics, it is essential to highlight its distinct features, which include an emphasis on social justice, eradication of poverty and discrimination, support for the oppressed, rejection of foreign dependence and respect for usury.

These principles have been repeatedly emphasized in the context of Islamic economics, but they do not constitute a fully comprehensive intellectual system on their own.

To establish a distinct Islamic economic system, it is necessary to further develop and refine these ideas to create a robust framework that differs significantly from capitalist and communist models.

In a meeting in Tehran in January 1980, Ayatollah Khomeini stated that the ultimate goal of the Islamic Republic is to make "everything" Islamic.

He described what constitutes an Islamic market, saying that it must not engage in practices that harm the economy or exploit the poor.

“For instance, a market that purchases goods for one toman and sells them for 30 to the rich while ignoring the needs of the poor is not Islamic,” he said.

Khomeini stressed the importance of "self-Islamization" and urged the market to become "Islamic." He criticized the construction of palaces while the plight of slum dwellers was ignored. 

Khomeini argued that “being an Islamic country is more than just a facade or an outward appearance; it is about having substance and actively working toward the betterment of society as a whole.”

Leaning on the Wind

There are many economists who fundamentally reject the idea of an Islamic economy. For example, Ghaninejad clearly stated that the Islamic economy does not exist.

This opinion is shared by some high-ranked Muslim scholars such as Ayatollah Mohammad Javad Alavi Tabatabai Boroujerdi, who referred to the Islamic economy as a joke in an interview with Echo Iran in 2019, just like socialist or capitalist economies.

However, supporters of an Islamic economy claim this concept suffered from misunderstandings.

The insistence on Islamizing all aspects of society, as Ayatollah Khomeini advocated, and on trying to solve economic crises by removing economic principles from Islam is the root of Iran's current economic situation.

Ghaninejad's criticism of Khamenei's and Khomeini's economic views in the debate with Derakhshan has become a lasting critique. He asked: Why should we accept the views of Khamenei and Khomeini, who are not experts in economics, regarding economic issues that require scientific expertise rather than jurisprudence?