The ideological battle of the 20th century that pitted socialism against capitalism cost millions their lives. In the end, socialism failed. Yet, even capitalism, as an idea, has failed to put forth a vision of hope for humanity. The West and even the Muslim world itself have forgotten that there is an alternative – Islamic economics.

    Islam is not just a religion; it is a total, all-encompassing way of life. Islam seeks to strike a chord of harmony between the spiritual and the material. Islam is able to do this through an economic system based on justice and equality. The Qur’an clearly lays out the foundations and principles of Islamic economics. For example, God addresses us as His vicegerents on earth:

Spend [in charity] out of the [substance] whereof He has made you Heirs. For, those of you who believe and spend [in charity] –  for them is a great reward. (57:7)

    The Qur’an warns the possessing classes:

And there are those who bury gold and silver and spend it not in the way of Allah; announce unto them a most grievous penalty. (9:34)

    Yet at the same time, the Qur’an ends class war with its call to reconciliation:

O mankind ! We created you from a single pair of a male and a female and made you into nations and tribes, that you may know each other [not that you may despise each other]. (49: 13)

    Ultimately, Islam seeks to create a system where justice, not profit reigns supreme. Islamic economics has two primary goals: to combat poverty and provide for a just and equitable distribution of wealth. The Islamic state does this through a variety of voluntary and mandatory mechanisms. For example, Zakah, a powerful redistributive tool, transfers money from the hands of the rich to the hands of the poor through charity. The abolition of riba prevents unfair lending schemes which penalize the poor. In addition, the state is required to provide each citizen with a minimum standard of living. As the Prophet (sws) said: ‘Any ruler who is responsible for the affairs of Muslims but does not strive sincerely for their well-being will not enter Paradise with them’ (Muslim, vol. 1, p. 126). Yet, at the same time, Islam achieves balance and maintains economic freedom by securing the individual’s right to private property.
    It sounds great, doesn’t it? But, perhaps it’s just too good to be true. Perhaps it’s nothing more than an empty dream of an Islamic utopia. But there is a precedent. I will argue that the ideals of economic and social justice discussed above were successfully implemented during the caliphate of ‘Umar Ibn Khattab, one of the great companions of the Prophet Muhammad (sws). ‘Umar (rta) took the Sunnah of the Prophet (sws) and basic Qur’anic principles and synthesized them into a convincing economic program. The program’s success had a lot to do with ‘Umar’s extraordinary vision and impeccable character. Here, it is important to understand Islamic economics as a dynamic system in which there is room for a variety of approaches. ‘Umar’s approach was consistent with the demands of the fledgling Muslim empire. In the context of the times in which he lived, he was able to propose solutions to the problems and dilemmas that the empire was facing.
    The Islamic state that ‘Umar (rta) ruled was one where equality extended everyone, even the caliph himself. ‘Umar (rta) believed that no one, no matter how important, should live in a way that would distinguish him from the rest of the people. ‘Umar (rta) lived a simple life and detached himself from any of the worldly luxuries. He wore worn-out shoes and was usually clad in patched-up garments. In one particularly telling instance, some of his companions were waiting outside for him and were curious as to why the caliph was taking so long to come out. They later found out that ‘Umar (rta) had no clothes to wear. He only had one suit in his possession and had to wait until it dried.
    ‘Umar (rta) could often be found sleeping on the bare floor of the mosque. Other times, he was among his people, helping the poor or delivering water and other goods to the widows (Ya‘qub, 387). When he would travel from Madinah to Makkah, he wouldn’t even bring a tent and instead would sleep under the shade of the trees. His eating habits also resembled those of a poor man rather than the leader of a great empire. His usual diet consisted of only olive oil and bread (Nu‘mani, 340). During the year of famine, ‘Umar (rta) suffered along with his people eating even less than before. In ‘Umar’s (rta) mind, it would not have been fair to eat well while his people were suffering. He cared deeply for the welfare of his people and would go to great lengths to ensure that everyone was content with his rule. Sometimes, he would even wander the streets at night as an anonymous passerby, where he would get the chance to meet and talk to his people, making sure that they were satisfied (Nu‘mani, 229).
    ‘Umar (rta) would expect no less from the governors and officials of the empire. His officers were not permitted to ride Turkish horses, eat sifted flour, wear expensive clothing, or keep a doorman at their homes (Ya‘qub, 66). In addition, when an official was appointed, an inventory of all his possessions would have to be taken. If any increase in his possessions or in his overall financial position was noticed, then an inquiry into the matter would have to be made and the added possessions were usually confiscated (Biladhuri, 219). Officers were often dismissed if they showed any outward signs of pride or wealth which might distinguish them from the people. One time, after a battle in 16 AH, ‘Umar (rta) saw Muhallim, a corpulent Bedouin leader dressed in magnificent regalia with sashes, necklaces, and the like. ‘Umar (rta) was disgusted by this extravagant display and so he ordered him to take everything off in front of his own people (Tabari, 2454). While these specific actions were not based on any specific laws in the Qur’an or the Hadith, they were certainly in keeping with the spirit of the Qur’an and its command to establish justice. To modern sensitivities, these restrictions might seem contrary to individual freedom. In some cases, though, the good of the community takes precedence over the individual. Infusing the empire with the ideals of egalitarianism and justice would not have been possible unless government officials set the best of examples. After all, it is impossible to have true justice without leaders who themselves are just.
    It is amazing how far Muslim countries today have gone from the example set by ‘Umar (rta) and his government. Muslim leaders today live in palaces as kings, separate from their people. Ibn Khaldun in his works speaks of this type of arrangement where there is a clear distinction between the khassah (the privileged) and the ‘ammah (the ordinary). The masses are constantly at odds with the elites. ‘Umar (rta), in contrast, wanted to blur the lines between the haves and have-nots, thereby erasing class distinctions which might inevitably lead to conflict. If there is anything that captures the essence of Islamic justice it is the idea that the leader of one of the greatest empires of the time would sleep under a tree in the desert like any other man.
    Till now, We have discussed how the leaders of the empire lived as equals among their people. Now we will go into more detail, looking at the workings and mechanisms of the Islamic welfare state during ‘Umar’s reign.
    While many West European countries did not have unemployment insurance until the late 19th century, the Islamic empire had it from the beginning. When a man was injured or lost his ability to work, then it would become the responsibility of the state to make sure that his minimum needs were met. He and his family would receive an allowance from the public treasury (Ya‘qub, 85). ‘Umar’s state also provided ‘social security’ for the elderly; the old who had stopped working could count on receiving a stipend from the public treasury. Abandoned babies were also taken care of. One hundred dirhams per year were spent on each orphan’s development (Biladhuri, 452).
    ‘Umar (rta), acting as guardian of the poor, would go to great lengths to make sure that no one in his empire went hungry. Sometimes ‘Umar (rta) would even distribute stipends among the people with his own hands (Nu‘mani, 228). During the great famine of 18 AH, the Islamic welfare state was tested. In the end, though, those who were in need of food, regardless of social position, received food coupons with which they could obtain wheat and flour (Nu‘mani, 226).
     In distributing the spoils of war, the caliph abolished all distinctions based on wealth, privilege, or position. He instead distributed the stipends based on service in the path of God. And while this was certainly subjective, some of the criteria that were looked upon included one’s performance in battle and one’s overall service to the community (Ya‘qub 456). Uthamah Ibn Zayd, for example, a slave, received a greater sum than ‘Abdullah, ‘Umar’s own son (Nu‘mani, 205).
    Justice and equality were ideals that ‘Umar (rta) and his government upheld in every facet of life. With all the money that was pouring into the treasury during ‘Umar’s time, one would expect that it would be used to build magnificent and ornate buildings. Yet the caliph was very careful to maintain the simplicity of government buildings (Nu‘mani, 90). Showy and extravagant displays were avoided. ‘Umar (rta) did not want to waste money on unnecessary luxuries. He believed that the money would be better spent if it went towards the welfare of the people rather than towards lifeless bricks.
    This brings us to the concept of public trusteeship or ownership, another integral part of the Islamic economic system under ‘Umar (rta). What this means is that utilities, infrastructure, or resources are allotted for public consumption as opposed to individual ownership. Specifically, Awqaf, or charitable trusts, serve to transfer wealth from the individual or the few to a social collective ownership (Iqbal, 183). Awqaf are intended to provide services to the community at large. For example, ‘Umar (rta) once bought a piece of land from the Banu Harithah. Instead of keeping it for his own individual benefit, he made it into a charitable trust. The profit and produce from the land went towards benefiting the poor, slaves, and travelers (Nu‘mani, 339).
    The goal of Islamic economics is to establish social and economic justice. Implicit is the recognition that Muslims will be able to focus on Allah if their basic needs are provided for. The caliphate of ‘Umar (rta) succeeded in ensuring a minimum standard of living for all; virtually no one lived under the poverty line. We should look into how this was possible. ‘Umar (rta) did this by first determining the poverty threshold. He then ordered that twenty-five seers of flour be baked. This amount of flour fed thirty men. The conclusion was then drawn that fifty seers would be sufficient to feed a man for a month. And indeed, the poor would receive a food ration of fifty seers of flour each month (Nu‘mani, 223). Not only that, but the poor and disabled were guaranteed a cash stipend as well. Today, in the richest and most advanced country, the United States, thousands are homeless and must struggle day-in and day-out to find enough food to survive. This notion of an income floor was quite innovative and ‘Umar (rta) and the Islamic state should be credited with beginning this practice.
    In the spirit of balance though, to make sure that these government services weren’t taken advantage of, begging and laziness were not tolerated. Those who received government benefits were expected to be contributing members in the community (Nu‘mani, 226-7).   Furthermore, the Islamic state did not go so far as to advocate absolute equality, for such a notion is clearly at odds with the different capabilities and talents that God blessed us with. And, absolute equality could only come about at the expense of the individual economic freedom that God has granted us. The Qur’an acknowledges the inevitable existence of inequality:

God has bestowed His gifts of sustenance more freely on some of you than on others. (16:71)

    The goal of the Islamic state is therefore not to abolish inequality but rather to minimize it as much as possible.
The caliphate of ‘Umar (rta) provides students of history with a fascinating example of the historical application of Islamic economics. But, ultimately, why is this relevant? It is relevant because humanity is in need of economic and spiritual alternatives to the existing socio-economic structures. Socialism and capitalism both have advantages, yet they also have grave defects which make them far from ideal. Socialism is essentially a reaction to the evils of capitalism. It replaces the dictatorship of the economic elite with a dictatorship of the proletariat. Ultimately, the individual is subject to a totalitarian system devoid of a moral or spiritual compass. Capitalism is at best morally neutral. At worst, it is a system that dehumanizes the individual and makes him a slave to profit maximization. The Islamic economic system is unique in that it strives to achieve a balance between these extremes. It seeks to strike a chord between the need for individual economic freedom and the need to serve the common good.
    Man is motivated by self-interest and this is inevitably true in both socialist and capitalist systems. Without religion or a spiritual foundation, self-interest can only lead to an ever-widening gap between the rich and the poor. That is why socialism failed to accomplish what it set out to do – establish economic equality. Yet, Islam resolves the conflict between self-interest and the collective good. It expands and stretches the usually narrow concept of self-interest to include not only the desire for worldly things but also the desire for Paradise (Chaprah, 28). It is in every Muslim’s self-interest to reach Paradise. This interest cannot be served except by fulfilling one’s social obligations and by working for social and economic justice in one’s community. So, in other words, in an Islamic system, one’s desire for material wealth will be kept in check by one’s greater desire for Paradise, resulting in a synthesis of the material and spiritual.
The emphasis here is on the spiritual foundation of Islamic economics. ‘Umar (rta) was just in his rule because of his genuine love for the people but also because of his love of God and his fear of hellfire. He knew he would be held accountable in front of God for the welfare of his people. This accountability, which does not exist in secular economic systems, motivates rulers to be more just in how they use the wealth and resources at their disposal.
    ‘Umar’s economic model provides us with an attractive alternative. But, the question is how to apply it in today’s world? Of course, it would be impossible to copy ‘Umar’s model. The challenges that we face in today’s world are quite different than the challenges that Muslims faced in the 7th century. Today, countries must provide for millions of citizens. Back then, there were less people to account for. In addition, the phenomenon of globalization has given us a challenging paradigm in which to work.
    Nevertheless, the spirit of ‘Umar’s economic decisions can certainly serve as useful markers for students of economics everywhere. Specific redistributive measures such as Zakah, income floors, poverty threshold, and Awqaf can certainly be implemented within the modern context. But for these measures to ensure equality and distributive justice, then they must be accompanied by a strong religious and spiritual foundation.
    Yet, the turbo-capitalist-globalist model which currently dominates international economics is a model which ignores the complexity of man and his spiritual needs. It is an imbalanced system that encourages greed and condones exploitation. Capital is used to make a profit. The profit is then reinvested in order to accumulate even more capital. And, so on. In the Islamic system, the means are not confused with the ends. Acquiring wealth and making profit is simply a means to the greater end of establishing justice and fulfilling God’s will.  The spirituality of man is not neglected. And this is what sets the Islamic economic system apart.
    Today, the world is ripe with gross economic inequality and extreme poverty. To plot a better future for our children, perhaps we would be well-served to look at and learn from the past. We need not be restricted to either capitalism or socialism. The Islamic alternative is one that deserves the careful attention of all students of history, Muslim and non-Muslim alike. In a world where darkness and despair reign supreme, perhaps the spirit and the principles of Islamic economics can provide us with a ray of light.

Works Cited
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    Al-Qushayri, Muslim Ibn al-Hajjaj, Sahih Muslim, vol. 1, Beirut, Lebanon: Dar al Arabia, 1997.
    Al-Tabari, Tarikh al-Umam wa’l-Muluk, vol. 13, Trans. Gautier H. A. Juynboll. Albany, New York: State University of New York Press, 1989.
    ‘Ali, Abdullah Yusuf, The Meaning of the Holy Qur’an, Beltsville, Maryland: Amana Publications, 2001.
    Chapra, M. ‘Umar, The Islamic Welfare State and its Role in the Economy. Leicester, U.K: The Islamic Foundation, 1979.
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    Ibn Khaldun, ‘Abdu’l-Rahman, An Arab Philosophy of History. Trans. Charles Issawi. Princeton, New Jersey: The Darwin Press, 1987.
    Iqbal, Munawwar. Distributive Justice and Need Fulfillment in an Islamic Economy. Leicester, U.K: The Islamic Foundation, 1986.
    Nu‘mani, Shibli, ‘Umar the Great: the Second Caliph of Islam. Trans. Muhammad Saleem. Lahore, Pakistan: Ashraf Press, 1957.
    Ya‘qub, Abu Yusuf, Kitabu’l-Kharaj, trans. A. Ben Shemesh. London: Luzac, 1969.