Supply and Demand

Unfortunately, I accidentally deleted the comments in this section, but was able to retrieve them from Google’s cache, so here they are pasted as a single piece of text in which it is not clear who is saying what, but insha’Allah the gist should come across as most posts are signed.

?. Asalamualaykum
I never thought of it like that (that supply and demand are immoral, I always thought this is acceptable with the provision that human beings are moral and live for Allah and no other reason. thank you for clarifying it for me.
I was reading your essay on Dawkins on your website and thought you might find this Christian criticism of Dawkins’ atheism and naturalism as if it is ‘fact’ or ’science’ interesting.
all the docs are here:
http://www.arn.org/docs/williams/
but this one I found put things exactly as I thought, except this person has the right vocabulary to say it, where as I lack this:
http://www.arn.org/docs/williams/pw_angelsreview_1.htm
Salaam
Comment by Riyadh — July 13, 2008 @ 2:00 pm
?. 
?. wa alaikum as-salam, thank you for the article which is very interesting, even if it does not, and probably never could, express our position. For example, the Christians are caught by Bacon’s god who “works through secondary causes”, which traps them in the creation with God receding further and further to be beginning of time before the Big Bang. The Muslims know that Allah, exalted is He, is the direct cause of everything. This is the fundament of tawhid. 
Abdassamad
Comment by admin — July 14, 2008 @ 1:08 am
?. 
?. salam alaikum, If the law of supply and demand is immoral, then who should be in charge of determining prices? it is one thing to a say that the law is immoral when taken to its extreme, but is that not what regulation and governments are for? Any market allocation of goods will have its flaws – that is why its up to people to control and constrain it, not necessarily abolish it. what would you suggest instead of a supply and demand?
Comment by kazi — July 14, 2008 @ 9:07 pm
?. 
?. wa alaikum as-salam. 
There are different parts of the shari’ah that govern trade. The Muslims largely looked at the cost to them of goods, what expenses they had, then they added a reasonable mark-up and sold it. But this was the way people conducted trade everywhere. It is an appalling attitude to trade to sell things for what you can get, particularly when it pertains to basic necessities. 
A Muslim market is governed by the qadi and the muhtasib who inspects it for such matters. 
Equally pernicious is the opposite of supply and demand: undercutting. It is not permitted to sell items of a known value below the known market value. If the muhtasib suspects a trader of doing that, he takes him to the qadi who summons other respected and experienced traders who let him know the value of such goods and then he compels him to sell at the known price. Undercutting is a vicious practice by which wealthy monopolists drive lesser people out of business.
There are many matters of the shari’ah that are simply unknown to Muslims who enter the market today, but which are obligatory for them to know. Most of these completely forbidden acts are everyday business practice today.
As-salamu alaikum,
Abdassamad Clarke
Comment by admin — July 14, 2008 @ 11:11 pm
?. 
?. Salam Alaikum
It is one thing to criticize the market because of its failings, it is another to criticize it because of some sort of ideological bias. What you have articulated is basically the same market system that is in place in most regulated economies. The Qadi role that you referenced is no different than the role played by government regulators. In a market economy, the basic idea is that if there are excess profits to be made, more firms will enter the business until the price of the good falls until there is only basic operating profits. (what you call a small markup)
The difference is you start from a point of regulation, which opens the system to corruption which is the scourge of muslim nations everywhere. as soon as you appoint someone to determine what prices are “fair” that person will then fix prices so that his friend or his brother will benefit from them. This is the nature of government and of politics. 
Anti-competitive practices and price-gouging are well known problems in the market system. The degree to which they are managed properly is the degree by which the government regulators are held to their honesty by the people.
Islam provides no utopia or panacea here, it only expects people to live by certain principles and sets a moral code, as your correctly articulated, about how economic affairs should be governed. Those principles can be achieved through a market system as much as they can be achieved through the system you articulated.
I am far more comfortable with the market because i would rather not have the government telling people what a fair price is. The government should be protecting people from abuse, not determining things that people can decide through their purchasing decisions. Both systems will be open to corruption, but i believe by empowering a Qadi to make pricing decisions you are setting up a system for vast amounts of corruption and inefficiency. Yes markets are not perfect, but that does not mean qadis are any better.
wasalam alaikum
Comment by kazi — July 16, 2008 @ 4:59 am
?. 
?. Wa alaikum as-salam,
First, you are thinking ideologically and you have accepted the propaganda of the so-called ‘free market’, which is nowhere free. Anything that might be considered a market space is now owned by a diminishing group of mega-corporations, and they are scooping up all the mini-corporations, the small businessman having long ago gone to the wall. I speak with some exaggeration, but I think you understand what I mean. All of this is heavily dependent on legislation which effectively penalises everyone but the mega-corporations and the banks. There is simply nothing free about it at all. It is exactly akin to Bush declaring that he is bringing ‘freedom’ to the Middle East. We have become accustomed to such language and we expect a horrendous body count whenever we hear the word ‘freedom’ on such lips.
Second, you raise the spectre of Muslims living by principles, but I cannot remember an ayah of Qur’an or a hadith of the Prophet, may Allah bless him and grant him peace, that says such a thing. Correct me if I am wrong. Rather there are very specific things said about economics and, moreover, there was a very specific practice in the Muslim lands before colonisation which was the application of the Sunnah and, in spite of differences of the madhhabs, had a great deal in common. There were in fact free markets in which anyone, literally anyone, could go and trade without being charged a rent or taxed, in which the wealthy merchant started on the same basis as the poorest of people. This was the practice and this is established in well-known hadith. In fact, the Muslims had a genuine free-market economy. 
Third, you conflate my qadi with government control, but this is a serious mistake, for just as in the official dogma of today the judiciary is supposed to be independent of the executive, in the deen the ulama did have a degree of distance from political power. Of course, there was crossover, and it fell to the amir to appoint people to posts at some points, but when things were well the ulama were a locus of political power that stood apart from the amir, and if necessary, reproved and guided him. In that, they were the inheritors of the Book and the Sunnah, with a duty to uphold them, because our deen is not a set of abstract principles, but a revealed legislation. It is not a vague moral code, but specific laws.
Fourth, beware of anthropomorphising Islam: Islam does not expect anything of anyone, because Islam is not an entity.
In short, there is no free market in operation today for this is one of the most tightly controlled societies that there have ever been. But this society has devised a compelling ideology that mesmerises people and can convince them that black is white. In the Celtic chieftains phrase about the Romans, “They have made a desert and called it peace.” We could add they have made a totally controlled society and market and called it freedom. That does not make it freedom. 
We say there is no god but Allah and Muhammad is the Messenger of Allah, may Allah bless him and grant him peace, and then we are bound to look at the message or we are simply deluding ourselves in our belief that we are Muslims. That message has laws and those laws extend to how the market works. Within those very specific laws there is more freedom than the modern slave can even dream of in his wildest fantasies.
As-salamu alaikum,
Abdassamad Clarke
Comment by admin — July 16, 2008 @ 5:54 am
?. 
?. Asalam Alaikum
Yes you are correct, market economies have gone by way of the big mega corporation which in many ways hurts consumers and creates exploitative environments. This is very true and your criticism is entirely valid. Having said that one could argue this is because regulators/politicians/lawmakers are also benefiting from these crimes so that is one reason why consumers are no longer being protected. The war profiteering chronicled by Jeremy Schahill in his book on Blackwater is only one clear proof of this. So is the problem the market (from a structural standpoint -that it is always corrupt as you would argue) or is it simply the failure of regulators to ensure the interests of the people.
You reference specific rules that our Prophet (peace be upon him) about economics. Do they include appointing a Qadi to determine the fairness of prices? If not, then how did you come up with that idea? Certainly the prohibition of riba is one, the requirements of zakat (tax on wealth) is another, the prevention of exploitation is a broad principle. What other rules are there that contradict pricing based on consumer behavior when properly regulated (to conform to all the rules of shariah)?
You have also correctly stated that there should be a distinction between the Qadi (the Ulama) and the state or the government, a separate locus of power that holds a check and balance to political power. So who chooses these individuals -as they are not performing a strictly religious function, but rather an economic one that has a direct impact on the level of profits that accrue to businesses. How are they held accountable if they are not elected? IF they are elected, would they not be subject to the same political machinations as any other politician. If they are selected based on level of knowledge, then who determines this level of knowledge? IF they are not businessmen then how can efficiency be guaranteed? if they are businessmen then how can fairness be achieved? Our traditional history took place in a particular context, where communities were overwhelmingly decentralized and much authority resided in the hands of local leaders. Modern states do not function that way. They are highly centralized and require a level of uniformity that did not exist in the past. How does a Qadi practically go about determining the price of tomatos in Denmark? Did not the communists try this to disastrous results? Is this really something that the Ulama need to be involved in? Of course your movement can seek to reestablish the type of global order that existed centuries ago, but in the interim period you need to come up with something that will function in the world we currently live in.
The problems you have associated with market economies are no different than the problems you will find when you place ulama in charge of fixing prices. There will be corrupt ulama who manage the economy so that they benefit from it, and they are the ones who will grab for power because the true ulama, the righteous inheritors of our tradition, would never touch such a position with a 500 foot pole. I challenge you to find one reputable scholar who would serve in such a position given the way the global economy is structured. They would see the latent potential for abuse of power and accumulation of wealth and run far far away. 
I entirely concur with your sentiments, we must strive to live under the rules that govern our faith and the example set by our Prophet. If those rules are specific, then we should certainly strive to our utmost capacity to follow them. Your allergies to the term “market” should not cloud your judgment regarding the use of such a system in preventing corruption as opposed to creating it. In the end all economic structures will be subject to corruption, because human beings will always have the instinct to acquire wealth in whatever way (legal or illegal) they can. Islam has defined principles (do not exploit) and in many cases as you have mentioned, specific rules (riba, zakat and others) that prevent this hoarding of wealth. To say market based pricing does not fit in this system because there are large corporations that can manipulate public policy only states the obvious and does not provide an actual solution to the problem.
Islamic finance, as you probably agree, has certainly gone the way of the profiteering that we see in the military industrial complex. A real solution not only articulates what an ideal world would look like, but also provides real answers that can be implemented tomorrow in the current world economy that will lift billions out of poverty and distribute wealth more effectively. I would suggest that while it is perfectly ok to dream about a better world, it is also absolutely urgent that we come up with practicable ideas that follow the shariah and help our people now. Your Qadi/ulama based system is not coming about tomorrow or even next week. In that time there and hundreds of millions of muslims languishing in poverty. what will you do for them? 
the fact of the matter is that commerce based on market pricing combined with new technologies have lifted hundreds of millions out of poverty. this is simply a fact, it cannot be disputed. because this system is abused by large multi-nationals does not mean it needs to be abolished. it needs to be constrained where abuses take place. there is no NGO, charity or system of zakat that has come anywhere close.
Yes markets can be abused to the detriment of people, but to abolish their role in a modern economy to be replaced by groups of ulama determining prices is not only absurd, its unrealistic and it helps no one in our current day. The poor Bangladeshi would much rather have his cell phone now (which was provided by the market), then wait for your qadi to come one day. Our ulama have been incapable of containing the massive abuse of islamic finance taking place in front of our eyes. what makes you think they can manage economies in the trillions of trillions of dollars? 
wasalam alaikum,
kazi
Comment by kazi — July 16, 2008 @ 10:36 pm
?. 
?. One more point on the ulama. I would be loathe to place our beloved Ulama in the position you have described because it would invite corruption into their ranks. Rather, the Ulama could play an equally positive and powerful role in policing those institutions that do determine prices. So if there is a case where anti-competitive practices are taking place, or there is price-gouging in cases of scarcity, the Ulama should be the first to ensure that all tenants of the shariah are in compliance and they should be free to bring cases against the offending parties. But to place them inside the economic structure and subject them to the economic forces and then expect them to remain untainted by them is unrealistic and unfair to them. 
In other words, the market plays an important role in allowing consumers to determine prices, while the ulama can play an equally important role of ensuring that whereever the market fails, all tenants of shariah are enforced. 
So for example, an obvious market failure today is the woeful abuse of our environment by large industry. Well in this case, the ulama, guided by the shariah, could introduce legislation that taxes or prohibits certain practices in accordance with the preservation of the planet. it is unclear to me how this type of system is un-Islamic or fails to take into account the demands of shariah is all laws are complied with.
wasalam alaikum
kazi
Comment by kazi — July 16, 2008 @ 11:20 pm
?. 
?. As-salamu alaikum,
Sidi,
Somehow we are not communicating. I would like to avoid point scoring and trying to prove my point, which is very tempting in such discussions, but we both have to agree not to try and argue our points but to see if we can communicate and reach to the truth. 
THE MARKET NO LONGER EXISTS, AND CERTAINLY NOT THE FREE MARKET. 
We live in the age of liars, very big liars. When they say freedom, you have to understand they mean a concentration camp. When they say free trade and free markets, you have to understand that they mean monopolistic distribution of goods made by corporations, owned by shareholders who play with their shares on the stock exchange, while we are forced to buy their garbage since everyone else is put out of business, everyone else is prevented from entering the market place. 
Does the above make any sense to you? Because, it seems to me that you are a ‘believer’ in the free market, in that you are reproducing what the evangelists for the free market tout as its merits. But we have to remember that the key to everything that is Europe and the West and its heritage is the idealist tradition that stems from Plato and which was absorbed by Christianity. The very essence of this is to think ideas and to posit ideals. 
However, our deen of Islam is based on something very different: the revelation from Allah, and its embodiment by the Messenger of Allah, may Allah bless him and grant him peace, and his companions in Madinah, in its mosque, in its houses, in its orchards and farms and in its market. Even though they were not intrinsically an elite or exceptional people they were the best generation of all humanity. Therefore all the Muslims agree on taking them as models for our acts of worship and for our ordinary transactions. The word that denotes this is the Sunnah. All the Muslims are agreed that the Sunnah applies to acts of worship and to ordinary transactions such as buying and selling, getting married, and getting divorced, etc.
This idealist approach and the Sunnah approach are entirely different. They work completely differently. You can’t mix them up. You have to distinguish these two processes.
The greatest of our most recent philosophers and thinkers from the West have realised that the idealist approach that stems from Plato is dangerous and is the cause of many illnesses of our society. I mean Nietzsche, Heidegger, Kierkegaard, Dostoyevsky, D. H. Lawrence, Thomas Carlyle and many others. 
The type of thinking that espouses the ‘free market’ comes from this idealist tradition. We do not need to be cynical then to realise that the positing of the ideal of the free market has resulted in something completely different from the ideal and, indeed, diametrically opposed to it, and yet it is the dilemma of the idealist that he must continue to posit the ideal and attribute its failure to corruption. But it is not corruption that is the intrinsic cause of its failure but the very process of idealism.
Our approach is entirely different. The revelation came down and, as well as transmitting its words and teaching, the Messenger of Allah, may Allah bless him and grant him peace, was the embodiment of it. But if it had stopped there, we would all have said that he, may Allah bless him and grant him peace, was clearly an exceptional being. Thus we would have had an excuse not to copy him. However, the people of Madinah, who were clearly a very representative sample of humanity, unexceptional in every way, and indeed largely illiterate in our view, clearly took on this Sunnah and became transformed by it into the most exceptional people. And the process of Islam has been from that day to this, that generation by generation, perfectly ordinary people have learnt this deen and taken on its embodiment which they learnt from the previous generations who had embodied it. That is because it is possible to be practised by completely ordinary people.
Where the Muslims are not well, then they have super ‘ulama alongside ignorant Muslims who do not practice. Such super ‘ulama are a part of a disease. In their extraordinary knowledge they keep the ordinary Muslims ignorant and thus become like a priesthood. Such a dichotomy is completely uninteresting for us. We expect to see, when we meet genuine societies that have inherited Islam in an authentic way, societies of knowledgeable Muslims among whom are people with an extra degree of knowledge which they embody to a high degree and teach to others.
I personally have seen examples of both patterns. 
You ask a specific: where do I get the idea of the qadi and the muhtasib from? These were both things that the Prophet, may Allah bless him and grant him peace, did. Then in later generations, the khalifahs appointed people to take on these tasks, as it was no longer possible for one man to do everything that the Messenger of Allah, may Allah bless him and grant him peace, had done. This is agreed upon by the people of knowledge. Nevertheless, many of our caliphs at various times manifested these characteristics, keeping this sunnah alive, walking in the markets, checking the goods and prices etc.
Moreover, the greatest of the ‘ulama have taken on the role of qadi throughout history: Imams Abu Yusuf and Muhammad ibn al-Hasan, the two great imams and students of Abu Hanifah, Qadi Iyad and Qadi Abu Bakr ibn al-Arabi, the two great qadis of Andalusia, Qadi Abu Ya’la of the Hanbalis and innumerable others. Fearing corruption, yet they knew that their knowledge had to be embodied not just taught in madrasahs and written in books and so they took on these roles self-sacrificingly for the sake of the Muslims.
You present it as if in our discussion we have to rearrange the present order of the world and make plans for it, but neither you nor I are in a position to do such a thing. Whether or not we have sensible and realistic plans for the world no one is going to listen to us, at least no one of any significance.
So that is not how things work. First, we are required to have knowledge, clear knowledge of our deen, which encompasses knowledge of Allah, His attributes and actions, and knowledge of the Messengers, etc., as well as knowledge of the acts of worship and knowledge of how to behave in the world. We are required to act according to our knowledge as much as we are able. That means how we behave in our own transactions, how we earn our livelihoods, how we shop and spend, etc. 
It is the disease of private men, who have no control in their own lives, and who basically have a job, a wife and some children, that they think they know how to organise the planet. We do that, and we don’t even know our neighbours. 
Of course, if we are living the lives of private individuals in the modern world, we are not proceeding from the perspective of the Companions, who were a community bonded together in obedience to their leader, may Allah bless him and grant him peace, and striving with everything they had to bring Islam about in the world. Therefore, for our own good we have to come together in such communities under leaders striving to bring about Islam in our age and in our societies. If we do that, even if that community is only a few people under a local leader, then we are already stronger than we were before as private individuals or families, and we are now living in some way comparable to that of the Companions, or at least comparable enough that we can apply our knowledge of their experience to our situations. Therefore the possibilities of action are much greater. And these are real possibilities for real action, however small and limited they might look, as opposed to being a private person discussing how the planet should be organised which is simply daydreaming.
You ask about some examples of specifics about trade, and for your interest I refer you to just one example, the chapter of a book I edited and partly authored on the Shariah:
http://www.bogvaerker.dk/23.Tijarah.pdf
Perhaps that is enough for now. I know I have not answered all your points, but I have, instead, tried to speak to the essence of what you are talking about. And there is no success but by Allah.
As-salamu alaikum,
Abdassamad Clarke