An Islamic perspective on governance
It was a pleasure to read An Islamic Perspective on Governance by Zafar Iqbal and Mervyn K. Lewis. The authors have undertaken innovative research to examine the Islamic and contemporary western concepts, institutions, processes and traditions about governance: public, corporate, financial and fiscal. This study breaths some fresh air into the debate on some of the critical issues of positive economics by exploring new linkages of governance with normative goals, ethical frameworks and egalitarian policy initiatives. I hope this path-breaking study may open up new avenues of growth in the fiscal economics of tomorrow. In my view, the uniqueness of An Islamic Perspective on Governance lies in building on the contributions of the positive approach, impregnating it with a new vision of human destiny characterized by moral excellence and centrality of justice in all areas of human effort and governance. Morality, in this new paradigm is not confined only to human motivation and personal virtue; it influences the entire fabric of human life and refashions all dimensions of Governance: goals, laws, institutions, processes, policies, rules and regulations and checks and balances. The authors have made a seminal effort to reintroduce, in a highly integrated manner, moral commitment, social responsibility, and justice to the conventional agenda of political economy. That makes efficiency and equity inseparable twins, co-existing in harmony and not strange bed-fellows. An Islamic Approach to Governance presents, in a snapshot, some of the key areas of Islamic economics. It also contains a thoughtful critique of the present state of the discipline and identifies some of the challenges that beset it. It also provides some food for thought for Islamic economists and policy makers, to not only further refine their tools and products, but also to make substantive efforts to do justice to the new paradigm Islamic economics claims to represent.
An Islamic perspective on public finance
Governments play many roles in a society, some political, some social, and some economic (Tanzi, 1997). These roles are guided by a notion of common good and constrained by availability of finances. This interaction between ideology and economics lies at the heart of public finance. The central question examined in this dissertation is if, how, and to what extent the goals, norms and values implied in the Holy Qur'an and sunnah result in a mode of government fiscal organisation similar to or different from the received from the received Western model. The methodological framework employed uses the tenets of Islamic socio-economic justice as the theory-choice criteria to analyse and choose among multiple Western social-scientific theories on a selected topic and then build further upon them. Thus the Islamic call for financing redistribution through zakah translates into a levy on net worth (beyond a stipulated minimum) and a charge on earned income. For general taxation, however, any economically feasible tax is admitted as long as the aggregate burden of general taxation is not regressive. On financing public expenditure in excess of taxation, the Islamic prohibition of fixed interest and appreciation of profit and loss sharing arrangements is found to impose commercial discipline on state activities thereby ameliorating public choice concerns on government failure. Alternatives such as in-kind finance, public-private partnerships, and ijtihadi instruments are proposed. Combining these findings into one theory produces an Islamic parallel to the Keynesian solution for demand management that depends on charge in the mix of taxation and the mode of (commercial and) deficit finance to motivate efficient utilisation of wealth and its circulation through participatory finance. Moving from the normative to the positive analysis, it is observed that the principles of fairness in fiscal management are compromised by a wide margin in many jurisdictions. This recognition provides a link with the pivotal role that governance plays in social and economic development. To this end, it is noted that Islam emphasises on cultivating internal restraint against corruption through developing a clear higher-order preference for a catalogue of values and virtues so as to arbitrate among competing first-order desires. In comparison, the Western strategy focuses on appropriate institutions that harness incentives toward minimising opportunities and enticement for corruption. The conclusion reached is that both ingredients are essential for good governance and by implication, for the success of the taxation and deficit finance schema developed in this thesis. Drawing together the analyses presented on taxation, deficit finance and governance produces an Islamic agenda that calls Muslin nations to put their own houses in order. This means an urgency to work on multiple fronts: rethinking governance, re-establishing supremacy of law, reforming taxation in line with domestic income and wealth profile and economic priorities, facilitating appropriate investment profile and climate, and reconsidering expenditure priorities. To the end we have highlighted some constraints and made detailed proposals.