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This is a sub-article of Islamic economic jurisprudence and Muslim world.

Islamic economics in practice, or economic policies supported by self-identified Islamic groups, has varied throughout its long history. Traditional Islamic concepts having to do with economics included

  • zakat - the "taxing of certain goods, such as harvest, with an eye to allocating these taxes to expenditures that are also explicitly defined, such as aid to the needy."
  • Gharar - "the interdiction of chance ... that is, of the presence of any element of uncertainty, in a contract (which excludes not only insurance but also the lending of money without participation in the risks)"

These concepts, like others in Islamic law and jurisprudence, came from the "prescriptions, anecdotes, examples, and words of the Prophet, all gathered together and systematized by commentators according to an inductive, casuistic method." [1] Sometimes other sources such as al-urf, (the custom), al-aql (reason) or al-ijma (consensus of the jurists) were employed.[2] In addition, Islamic law has developed areas of law that correspond to secular laws of contracts and torts.

Early Islamic economics[]

Early reforms under Islam[]

Some argue early Islamic theory and practice formed a "coherent" economic system with "a blueprint for a new order in society, in which all participants would be treated more fairly". Michael Bonner, for example, has written that an "economy of poverty" prevailed in Islam until the 13th and 14th centuries. Under this system God's guidance made sure the flow of money and goods was "purified" by being channeled from those who had much of it to those who had little by encouraging zakat (charity) and discouraging riba (usury/interest) on loans. Bonner maintains the prophet also helped poor traders by allowing only tents, not permanent buildings in the market of Medina, and not charging fees and rents there.[3]

Corporate social responsibility in commerce[]

Social responsibility and corporate social responsibility in commerce was stressed in Islamic sociology. The development of Islamic banks and Islamic economics was a side effect of this sociology: usury was rather severely restrained, no interest rate was allowed, and investors were not permitted to escape the consequences of any failed venture—all financing was equity financing (Musharaka). In not letting borrowers bear all the risk/cost of a failure, an extreme disparity of outcomes between "partners" is thus avoided. Ultimately this serves a social harmony purpose. Muslims also could not and cannot (in shariah) finance any dealings in forbidden goods or activities, such as wine, pork, gambling, etc. Thus ethical investing is the only acceptable investing, and moral purchasing is encouraged.[4]

Legal institutions[]

See also: Sharia and Fiqh

Takaful insurance[]

Main article: Takaful

Takaful (Arabic: التكافل) is a co-operative system of reimbursement in case of loss, paid to people and companies concerned about hazards, compensated out of a fund to which they agree to donate small regular contributions managed on behalf by a Takaful Operator[5] It is defined as an Islamic insurance concept which is grounded in Islamic muamalat (Islamic banking), observing Islamic law. This concept has been practised in various forms since 622 CE.[6] Muslim jurists acknowledge that the basis of shared responsibility (in the system of aquila as practised between Muslims of Mecca and Medina) laid the foundation of mutual insurance.

Hawala agency[]

Main article: Hawala

The Hawala, an early informal value transfer system, has its origins in classical Islamic law, and is mentioned in texts of Islamic jurisprudence as early as the 8th century. Hawala itself later influenced the development of the agency in common law and in civil laws such as the aval in French law and the avallo in Italian law. The words aval and avallo were themselves derived from Hawala. The transfer of debt, which was "not permissible under Roman law but became widely practiced in medieval Europe, especially in commercial transactions", was due to the large extent of the "trade conducted by the Italian cities with the Muslim world in the Middle Ages." The agency was also "an institution unknown to Roman law" as no "individual could conclude a binding contract on behalf of another as his agent." In Roman law, the "contractor himself was considered the party to the contract and it took a second contract between the person who acted on behalf of a principal and the latter in order to transfer the rights and the obligations deriving from the contract to him." On the other hand, Islamic law and the later common law "had no difficulty in accepting agency as one of its institutions in the field of contracts and of obligations in general."[7]

Waqf trust[]

Main article: Waqf

The waqf in Islamic law, which developed in the medieval Islamic world from the 7th to 9th centuries, bears a notable resemblance to the English trust law.[8] Every waqf was required to have a waqif (founder), mutawillis (trustee), qadi (judge) and beneficiaries.[9] Under both a waqf and a trust, "property is reserved, and its usufruct appropriated, for the benefit of specific individuals, or for a general charitable purpose; the corpus becomes inalienable; estates for life in favor of successive beneficiaries can be created" and "without regard to the law of inheritance or the rights of the heirs; and continuity is secured by the successive appointment of trustees or mutawillis."[10]

The only significant distinction between the Islamic waqf and English trust was "the express or implied reversion of the waqf to charitable purposes when its specific object has ceased to exist",[11] though this difference only applied to the waqf ahli (Islamic family trust) rather than the waqf khairi (devoted to a charitable purpose from its inception). Another difference was the English vesting of "legal estate" over the trust property in the trustee, though the "trustee was still bound to administer that property for the benefit of the beneficiaries." In this sense, the "role of the English trustee therefore does not differ significantly from that of the mutawalli."[12]

The trust law developed in England at the time of the Crusades, during the 12th and 13th centuries, was introduced by Crusaders who may have been influenced by the waqf institutions they came across in the Middle East.[13][14]

After the Islamic waqf law and madrassah foundations were firmly established by the 10th century, the number of Bimaristan hospitals multiplied throughout throughout Islamic lands. In the 11th century, every Islamic city had at least several hospitals. The waqf trust institutions funded the hospitals for various expenses, including the wages of doctors, ophthalmologists, surgeons, chemists, pharmacists, domestics and all other staff, the purchase of foods and remedies; hospital equipment such as beds, mattresses, bowls and perfumes; and repairs to buildings. The waqf trusts also funded medical schools, and their revenues covered various expenses such as their maintenance and the payment of teachers and students.[15]

Classical Muslim commerce[]

Template:Duplication

During the Islamic Golden Age, guilds were formed though officially unrecognized by the medieval Islamic city. However, trades were recognized and supervised by officials of the city. Each trade developed its own identity, whose members would attend the same mosque, and serve together in the militia.

Technology and industry in Islamic civilization were highly developed. Distillation techniques supported a flourishing perfume industry, while chemical ceramic glazes were developed constantly to compete with ceramics imported from China. A scientific approach to metallurgy made it easier to adopt and improve steel technologies from India and China. Primary exports included manufactured luxuries, such as wood carving, metal and glass, textiles, and ceramics.

The systems of contract relied upon by merchants was very effective. Merchants would buy and sell on commission, with money loaned to them by wealthy investors, or a joint investment of several merchants, who were often Muslim, Christian and Jewish. Recently, a collection of documents was found in an Egyptian synagogue shedding a very detailed and human light on the life of medieval Middle Eastern merchants. Business partnerships would be made for many commercial ventures, and bonds of kinship enabled trade networks to form over huge distances. Networks developed during this time enabled a world in which money could be promised by a bank in Baghdad and cashed in Spain. Each time items passed through one of the cities along this extraordinary network, the city imposed a tax, resulting in high prices once the items reached their final destinations. These innovations made by Muslims and Jews laid the foundations for the modern economic system.[Citation needed]

Transport was simple, yet highly effective. Each city had an area outside its gates where pack animals were assembled; found in the cities' markets were large secure warehouses; while accommodations were provided for merchants in cities and along trade routes by a sort of medieval motel.

The concepts of welfare and pension were introduced in early Islamic law as forms of Zakat (charity), one of the Five Pillars of Islam, since the time of the Abbasid caliph Al-Mansur in the 8th century. The taxes (including Zakat and Jizya) collected in the treasury of an Islamic government was used to provide income for the needy, including the poor, elderly, orphans, widows, and the disabled. According to the Islamic jurist Al-Ghazali (Algazel, 1058–1111), the government was also expected to store up food supplies in every region in case a disaster or famine occurs. The Caliphate was thus one of the earliest welfare states, particularly the Abbasid Caliphate.[16]

Age of discovery[]

Main article: Islamic geography
See also: Inventions in the Islamic world, Pre-Columbian Andalusian-Americas contact theories, Ibn Battuta, Tabula Rogeriana, and Piri Reis map

The Islamic Empire significantly contributed to globalization during the Islamic Golden Age, when the knowledge, trade and economies from many previously isolated regions and civilizations began integrating due to contacts with Muslim explorers, sailors, scholars, traders, and travelers. Some have called this period the "Pax Islamica" or "Afro-Asiatic age of discovery", in reference to the Muslim South-west Asian and North African traders and explorers who travelled most of the Old World, and established an early global economy[17] across most of Asia and Africa and much of Europe, with their trade networks extending from the Atlantic Ocean and Mediterranean Sea in the west to the Indian Ocean and China Sea in the east.[18] This helped establish the Islamic Empire (including the Rashidun, Umayyad, Abbasid and Fatimid caliphates) as the world's leading extensive economic power throughout the 7th-13th centuries.[17] Several contemporary medieval Arabic reports also suggest that Muslim explorers from al-Andalus and the Maghreb may have travelled in expeditions across the Atlantic Ocean between the 9th and 14th centuries.[19]

Arabic silver dirham coins were being circulated throughout the Afro-Eurasian landmass, as far as sub-Saharan Africa in the south and northern Europe in the north, often in exchange for goods and slaves.[20] In England, for example, the Anglo-Saxon king Offa of Mercia (r. 757-796) had coins minted with the Shahadah in Arabic.[21] These factors helped establish the Arab Empire (including the Rashidun, Umayyad, Abbasid and Fatimid caliphates) as the world's leading extensive economic power throughout the 7th–13th centuries.[17]

Agricultural Revolution[]

During the Muslim Agricultural Revolution, the Caliphate understood that real incentives were needed to increase productivity and wealth, thus enhancing tax revenues, hence they introduced a social transformation through the changed ownership of land,[22] where any individual of any gender[23] or any ethnic or religious background had the right to buy, sell, mortgage and inherit land for farming or any other purposes. They also introduced the signing of a contract for every major financial transaction concerning agriculture, industry, commerce, and employment. Copies of the contract were usually kept by both parties involved.[22]

The two types of economic systems that prompted agricultural development in the Islamic world were either politically-driven, by the conscious decisions of the central authority to develop under-exploited lands; or market-driven, involving the spread of advice, education, and free seeds, and the introduction of high value crops or animals to areas where they were previously unknown. These led to increased subsistence, a high level of economic security that ensured wealth for all citizens, and a higher quality of life due to the introduction of artichokes, spinach, aubergines, carrots, sugar cane, and various exotic plants; vegetables being available all year round without the need to dry them for winter; citrus and olive plantations becoming a common sight, market gardens and orchards springing up in every Muslim city; intense cropping and the technique of intensive irrigation agriculture with land fertility replacement; a major increase in animal husbandry; higher quality of wool and other clothing materials; and the introduction of selective breeding of animals from different parts of the Old World resulting in improved horse stocks and the best load-carrying camels.[22]

Hundreds of crops were diffused throughout the Islamic world and beyond as a result of the Muslim Agricultural Revolution. Some of these included artichokes, bananas, coconut palms, colocasia, cotton, eggplants, hard wheat, lemons, limes, mangos, plantains, rice, sorghum, sour oranges, spinach, sugar cane, and watermelons,[24] among hundreds of other crops.[22]

The demographics of medieval Islamic society varied in some significant aspects from other agricultural societies, including a decline in birth rates as well as a change in life expectancy. Other traditional agrarian societies are estimated to have had an average life expectancy of 20 to 25 years,[25] while ancient Rome and medieval Europe are estimated at 20 to 30 years.[26] The life expectancy of Islamic society diverged from that of other traditional agrarian societies, with several studies on the lifespans of Islamic scholars concluding that members of this occupational group enjoyed a life expectancy between 69 and 75 years.[27] Such studies have given the following estimates for the average lifespans of religious scholars at various times and places: 72.8 years in the Middle East, 69–75 years in 11th century Islamic Spain,[28] 75 years in 12th century Persia,[29] and 59–72 years in 13th century Persia.[30] However, Maya Shatzmiller considers these religious scholars to be a misleading sample who are not representative of the general population.[31] Conrad I. Lawrence estimates the average lifespan in the early Islamic Caliphate to be above 35 years for the general population.[32]

The early Islamic Empire also had the highest literacy rates among pre-modern societies, alongside the city of classical Athens in the 4th century BC,[33] and later, China after the introduction of printing from the 10th century.[34] One factor for the relatively high literacy rates in the early Islamic Empire was its parent-driven educational marketplace, as the state did not systematically subsidize educational services until the introduction of state funding under Nizam al-Mulk in the 11th century.[35] Another factor was the diffusion of paper from China,[36] which led to an efflorescence of books and written culture in Islamic society, thus papermaking technology transformed Islamic society (and later, the rest of Afro-Eurasia) from an oral to scribal culture, comparable to the later shifts from scribal to typographic culture, and from typographic culture to the Internet.[37] Other factors include the widespread use of paper books in Islamic society (more so than any other previously existing society), the study and memorization of the Qur'an, flourishing commercial activity, and the emergence of the Maktab and Madrasah educational institutions.[38]

Coinage[]

File:Roger II tari gold coin Palermo with Arabic inscriptions.jpg

Tarì gold coin of Roger II of Sicily, with Arabic inscriptions, minted in Palermo. British Museum.

The 8th century English king Offa of Mercia minted a near-copy of Abbasid dinars struck in 774 by Caliph Al-Mansur with "Offa Rex" centered on the reverse.[39] The moneyer visibly had little understanding of Arabic as the Arabic text contains a number of errors. Such coins may have been produced for reasons of ruler's prestige, or to trade with recently developing Islamic Spain.

File:Offa king of Mercia 757 793 gold dinar copy of dinar of the Abassid Caliphate 774.jpg

A gold dinar of the English king Offa of Mercia, a copy of the dinars of the Abbasid Caliphate (774). It combines the Latin legend OFFA REX with Arabic legends. British Museum.

File:Crusader coins of the Kingdom of Jerusalem.jpg

Crusader coins of the Kingdom of Jerusalem. Left: Denier in European style with Holy Sepulchre. Middle: One of first Kingdom of Jerusalem gold coins, copying Islamic dinars. Right: Gold coin after 1250, with Christian symbols following Papal complaints. British Museum.[40]

In Sicily, Malta and South Italy from about 913 tarì gold coins of Islamic origin were minted in great number by the Normans, Hohenstaufens and the early Angevins rulers.[41] When the Normans invaded Sicily in the 12th century, they issued tarì coins bearing legends in Arabic and Latin.[42] The tarìs were so widespread that imitations were made in southern Italy (Amalfi and Salerno) which only used illegible "pseudo-Kufic" imitations of Arabic.[43][44]

According to Janet Abu-Lughod:

The preferred specie for international transactions before the thirteenth century, in Europe as well as the Middle East and even India, were the gold coins struck by Byzantium and then Egypt. It was not until after the thirtheenth century that some Italian cities (Florence and Genoa) began to mint their own gold coins, but these were used to supplement rather than supplant the Middle Eastern coins already in circulation.[45]

Islamic capitalism[]

Main article: Islamic capitalism

A number of concepts and techniques were applied in early Islamic commerce, including bills of exchange, forms of partnership (mufawada) such as limited partnerships (mudaraba), and early forms of capital (al-mal), capital accumulation (nama al-mal),[46] cheques, promissory notes,[47] trusts (see Waqf), transactional accounts, loaning, ledgers and assignments.[48] Organizational enterprises independent from the state also existed in the medieval Islamic world, while the agency institution was also introduced.[49][50] Many of these early concepts were adopted and further advanced in medieval Europe from the 13th century onwards.[46]

A market economy was established in the Islamic world on the basis of an economic system resembling merchant capitalism. Capital formation was promoted by labour in medieval Islamic society, and financial capital was developed by a considerable number of owners of monetary funds and precious metals. Riba (usury) was prohibited by the Qur'an, but this did not hamper the development of capital in any way. The capitalists (sahib al-mal) were at the height of their power between the 9th–12th centuries, but their influence declined after the arrival of the ikta (landowners) and after production was monopolized by the state, both of which hampered the development of industrial capitalism in the Islamic world.[51] Some state enterprises still had a capitalist mode of production, such as pearl diving in Iraq and the textile industry in Egypt.[52]

During the 11th–13th centuries, the "Karimis", an early enterprise and business group controlled by entrepreneurs, came to dominate much of the Islamic world's economy.[53] The group was controlled by about fifty Muslim merchants labelled as "Karimis" who were of Yemeni, Egyptian and sometimes Indian origins.[54] Each Karimi merchant had considerable wealth, ranging from at least 100,000 dinars to as much as 10 million dinars. The group had considerable influence in most important eastern markets and sometimes in politics through its financing activities and through a variety of customers, including Emirs, Sultans, Viziers, foreign merchants, and common consumers. The Karimis dominated many of the trade routes across the Mediterranean Sea, Red Sea, and Indian Ocean, and as far as Francia in the north, China in the east, and sub-Saharan Africa in the south, where they obtained gold from gold mines. Practices employed by the Karimis included the use of agents, the financing of projects as a method of acquiring capital, and a banking institution for loans and deposits.

Adam Smith, one of the founders of modern capitalist economics, stated: [4]

"...the empire of the Caliphs seems to have been the first state under which the world enjoyed that degree of tranquility which the cultivation of the sciences requires. It was under the protection of those generous and magnificent princes, that the ancient philosophy and astronomy of the Greeks were restored and established in the East; that tranquility, which their mild, just and religious government diffused over their vast empire, revived the curiosity of mankind, to inquire into the connecting principles of nature."

Islamic socialism[]

Main articles: Islamic socialism and Bayt al-mal

Though medieval Islamic economics appears to have somewhat resembled a form of capitalism, some arguing that it laid the foundations for the development of modern capitalism,[55][56] some Orientalists also believe that there exist a number of parallels between Islamic economics and communism, including the Islamic ideas of zakat and riba.[57] Others see Islamic economics as neither completely capitalistic nor completely socialistic, but rather a balance between the two, emphasizing both "individual economic freedom and the need to serve the common good."[58]

Abū Dharr al-Ghifārī, a Companion of Prophet Muḥammad, is credited by many as the founder of Islamic socialism.[59][60][61][62][63] He protested against the accumulation of wealth by the ruling class during ‘Uthmān's caliphate and urged the equitable redistribution of wealth.

The concepts of welfare and pension were introduced in early Islamic law as forms of Zakat (charity), one of the Five Pillars of Islam, during the time of the Rashidun caliph Umar in the 7th century. This practiced continued well into the era of the Abbasid Caliphate, as seen under Al-Ma'mun's rule in the 8th century, for example. The taxes (including Zakat and Jizya) collected in the treasury of an Islamic government were used to provide income for the needy, including the poor, elderly, orphans, widows, and the disabled. According to the Islamic jurist Al-Ghazali (Algazel, 1058–1111), the government was also expected to stockpile food supplies in every region in case a disaster or famine occurred. The Caliphate is thus considered the world's first major welfare state.[16][58]

Industrial development[]

Muslim engineers in the Islamic world were responsible for numerous innovative industrial uses of hydropower, early industrial uses of tidal power, wind power,and fossil fuels such as petroleum. A variety of industrial mills were used in the Islamic world, including fulling mills, gristmills, hullers, sawmills, shipmills, stamp mills, steel mills, sugar mills, tide mills, and windmills. By the 11th century, every province throughout the Islamic world had these industrial mills in operation, from al-Andalus and North Africa to the Middle East and Central Asia.[64] Muslim engineers also invented water turbines, first employed gears in mills and water-raising machines, and pioneered the use of dams as a source of water power, used to provide additional power to watermills and water-raising machines.[65] Such advances made it possible for many industrial tasks that were previously driven by manual labour in ancient times to be mechanized and driven by machinery instead in the medieval Islamic world. The transfer of these technologies to medieval Europe later laid the foundations for the Industrial Revolution in 18th century Europe.[64]

Many industries were generated due to the Muslim Agricultural Revolution, including the earliest industries for agribusiness, astronomical instruments, ceramics, chemicals, distillation technologies, clocks, glass, mechanical hydropowered and wind powered machinery, matting, mosaics, pulp and paper, perfumery, petroleum, pharmaceuticals, rope-making, shipping, shipbuilding, silk, sugar, textiles, weapons, and the mining of minerals such as sulfur, ammonia, lead and iron]. The first large factory complexes (tiraz) were built for many of these industries. Knowledge of these industries were later transmitted to medieval Europe, especially during the Latin translations of the 12th century, as well as before and after. For example, the first glass factories in Europe were founded in the 11th century by Egyptian craftsmen in Greece.[66] The agricultural and handicraft industries also experienced high levels of growth during this period.[18]

In Islamic governments such as the Fatimid Caliphate, the tax collection, rather than being wasted on temples or courts, was invested industrial development, such as the Fatimid government's investment in the textile industry. In addition to government-owned tiraz textile factories, there were also privately-owned enterprises run largely by landlords who collected taxes and invested them in the textile industry.[67]

Labour force[]

The labor force in the Caliphate were employed from diverse ethnic and religious backgrounds, while both men and women were involved in diverse occupations and economic activities.[68] Women were employed in a wide range of commercial activities and diverse occupations[69] in the primary sector (as farmers for example), secondary sector (as construction workers, dyers, spinners, etc.) and tertiary sector (as investors, doctors, nurses, presidents of guilds, brokers, peddlers, lenders, scholars, etc.).[70] Muslim women also held a monopoly over certain branches of the textile industry,[69] the largest and most specialized and market-oriented industry at the time, in occupations such as spinning, dying, and embroidery. In comparison, female property rights and wage labour were relatively uncommon in Europe until the Industrial Revolution in the 18th and 19th centuries.[71]

The division of labour was diverse and had been evolving over the centuries. During the 8th–11th centuries, there were on average 63 unique occupations in the primary sector of economic activity (extractive), 697 unique occupations in the secondary sector (manufacturing), and 736 unique occupations in the tertiary sector (service). By the 12th century, the number of unique occupations in the primary sector and secondary sector decreased to 35 and 679 respectively, while the number of unique occupations in the tertiary sector increased to 1,175. These changes in the division of labour reflect the increased mechanization and use of machinery to replace manual labour and the increased standard of living and quality of life of most citizens in the Caliphate.[72]

An economic transition occurred during this period, due to the diversity of the service sector being far greater than any other previous or contemporary society, and the high degree of economic integration between the labour force and the economy. Islamic society also experienced a change in attitude towards manual labour. In previous civilizations such as ancient Greece and in contemporary civilizations such as early medieval Europe, intellectuals saw manual labour in a negative light and looked down on them with contempt. This resulted in technological stagnation as they did not see the need for machinery to replace manual labour. In the Islamic world, however, manual labour was seen in a far more positive light, as intellectuals such as the Brethren of Purity likened them to a participant in the act of creation, while Ibn Khaldun alluded to the benefits of manual labour to the progress of society.[69]

By the early 10th century, the idea of the academic degree was introduced and being granted at Maktab schools, Madrasah colleges and Bimaristan hospitals. In the medical field in particular, the Ijazah certificate was granted to those qualified to be practicing physicians, in order to differentiate them from unqualified quacks.[73]

While slaves were also sometimes employed due to the Arab slave trade, this was usually the exception rather than the norm. The vast majority of labour in the medieval Islamic world consisted of free, paid labour. The only known exceptions to this general rule was in the plantation economy of 9th-century southern Iraq (which led to the Zanj Revolt), in 9th-century Ifriqiya (modern-day Tunisia), and in 11th-century Bahrain (during the Karmatian state).[74]

Urbanization[]

There was a significant increase in urbanization during this period, due to numerous scientific advances in fields such as agriculture, hygiene, sanitation, astronomy, medicine and engineering.[22] This also resulted in a rising middle class population.[75]

As urbanization increased, Muslim cities grew unregulated, resulting in narrow winding city streets and neighborhoods separated by different ethnic backgrounds and religious affiliations. These qualities proved efficient for transporting goods to and from major commercial centers while preserving the privacy valued by Islamic family life. Suburbs lay just outside the walled city, from wealthy residential communities, to working class semi-slums. City garbage dumps were located far from the city, as were clearly defined cemeteries which were often homes for criminals. A place of prayer was found just near one of the main gates, for religious festivals and public executions. Similarly, Military Training grounds were found near a main gate.

While varying in appearance due to climate and prior local traditions, Islamic cities were almost always dominated by a merchant middle class. Some peoples' loyalty towards their neighborhood was very strong, reflecting ethnicity and religion, while a sense of citizenship was at times uncommon (but not in every case). The extended family provided the foundation for social programs, business deals, and negotiations with authorities. Part of this economic and social unit were often the tenants of a wealthy landlord.

State power normally focused on Dar al Imara, the governor's office in the citadel. These fortresses towered high above the city built on thousands of years of human settlement. The primary function of the city governor was to provide for defence and to maintain legal order. This system would be responsible for a mixture of autocracy and autonomy within the city. Each neighborhood, and many of the large tenement blocks, elected a representative to deal with urban authorities. These neighborhoods were also expected to organize their young men into a militia providing for protection of their own neighborhoods, and as aid to the professional armies defending the city as a whole.

The head of the family was given the position of authority in his household, although a qadi, or judge was able to negotiate and resolve differences in issues of disagreements within families and between them. The two senior representatives of municipal authority were the qadi and the muhtasib, who held the responsibilities of many issues, including quality of water, maintenance of city streets, containing outbreaks of disease, supervising the markets, and a prompt burial of the dead.

Another aspect of Islamic urban life was waqf, a religious charity directly dealing with the qadi and religious leaders. Through donations, the waqf owned many of the public baths and factories, using the revenue to fund education, and to provide irrigation for orchards outside the city. Following expansion, this system was introduced into Eastern Europe by Ottoman Turks.

While religious foundations of all faiths were tax exempt in the Muslim world, civilians paid their taxes to the urban authorities, soldiers to the superior officer, and landowners to the state treasury. Taxes were also levied on an unmarried man until he was wed. Instead of zakat, the mandatory charity required of Muslims, non-Muslims were required to pay the jizya, a discriminatory religious tax, imposed on Christians and Jews. During the Muslim Conquests of the 7th and 8th centuries conquered populations were given the three choices of either converting to Islam, paying the jizya, or dying by the sword.

Animals brought to the city for slaughter were restricted to areas outside the city, as were any other industries seen as unclean. The more valuable a good was, the closer its market was to the center of town. Because of this, booksellers and goldsmiths clustered around the main mosque at the heart of the city.

By the 10th century, Cordoba had 700 mosques, 60,000 palaces, and 70 libraries, the largest of which had 600,000 books, while as many as 60,000 treatises, poems, polemics and compilations were published each year in al-Andalus.[76] The library of Cairo had more than 100,000 books, while the library of Tripoli is said to have had as many as three million books. The number of important and original Arabic works on science that have survived is much larger than the combined total of Greek and Latin works on science.[77]

Classical Islamic economic thought[]

To some degree, the early Muslims based their economic analyses on the Qur'an (such as opposition to riba, meaning usury or interest), and from sunnah, the sayings and doings of Muhammad.

The origins of economics can be traced back to the work of the ancient Indian scholar-philosopher Chanakya, who laid down what is arguably the earliest writings of concepts concerning economics in the 4th century BC.[78][79][80]

Early Islamic economic thinkers[]

Al-Ghazali (1058–1111) classified economics as one of the sciences connected with religion, along with metaphysics, ethics, and psychology. Authors have noted, however, that this connection has not caused early Muslim economic thought to remain static.[81] Persian philosopher Nasir al-Din al-Tusi (1201–1274) presents an early definition of economics (what he calls hekmat-e-madani, the science of city life) in discourse three of his Ethics:

"the study of universal laws governing the public interest (welfare?) in so far as they are directed, through cooperation, toward the optimal (perfection)."[82]

Many scholars trace the history of economic thought through the Muslim world, which was in a Golden Age from the 8th to 13th century and whose philosophy continued the work of the Greek and Hellenistic thinkers and came to influence Aquinas when Europe "rediscovered" Greek philosophy through Arabic translation[83]. A common theme among these scholars was the praise of economic activity and even self-interested accumulation of wealth.[84] Persian leader Shams al-Mo'ali Abol-hasan Ghaboos ibn Wushmgir (Qabus) (died 1012) advises his son in the work Qabus nama:

"My son, do not be indifferent to the acquisition of wealth. Assure yourself that everything you acquire shall be the best quality and is likely to give you pleasure."

Persian philosopher Ibn Miskawayh (b. 1030) notes:

"The creditor desires the well-being of the debtor in order to get his money back rather than because of his love for him. The debtor, on the other hand, does not take great interest in the creditor."[85]

This view is in conflict with an idea Joseph Schumpeter called the great gap. The great gap thesis comes out of Schumpeter's 1954 History of Economic Analysis which discusses a break in economic thought during the five hundred year period between the decline of the Greco-Roman civilizations and the work of Thomas Aquinas (1225–1274).[86] However in 1964, Joseph Spengler's "Economic Thought of Islam: Ibn Khaldun" appeared in the journal Comparative Studies in Society and History and took a large step in bringing early Muslim scholars to the attention of the contemporary West.[87]

The influence of earlier Greek and Hellenistic thought on the Muslim world began largely with Abbasid caliph al-Ma'mun, who sponsored the translation of Greek texts into Arabic in the 9th century by Syrian Christians in Baghdad. But already by that time numerous Muslim scholars had written on economic issues, and early Muslim leaders had shown sophisticated attempts to enforce fiscal and monetary financing, use deficit financing, use taxes to encourage production, the use of credit instruments for banking, including rudimentary savings and checking accounts, and contract law.[88]

Among the earliest Muslim economic thinkers was Abu Yusuf (731-798), a student of the founder of the Hanafi Sunni School of Islamic thought, Abu Hanifah. Abu Yusuf was chief jurist for Abbasid Caliph Harun al-Rashid, for whom he wrote the Book of Taxation (Kitab al-Kharaj). This book outlined Abu Yusuf's ideas on taxation, public finance, and agricultural production. He discussed proportional tax on produce instead of fixed taxes on property as being superior as an incentive to bring more land into cultivation. He also advocated forgiving tax policies which favor the producer and a centralized tax administration to reduce corruption. Abu Yusuf favored the use of tax revenues for socioeconomic infrastructure, and included discussion of various types of taxes, including sales tax, death taxes, and import tariffs.[89]

Early discussion of the benefits of division of labor are included in the writings of Qabus, al-Ghazali, al-Farabi (873–950), Ibn Sina (Avicenna) (980–1037), Ibn Miskawayh, Nasir al-Din al-Tusi (1201–74), Ibn Khaldun (1332–1406), and Asaad Davani (b. 1444). Among them, the discussions included division of labor within households, societies, factories, and among nations. Farabi notes that each society lacks at least some necessary resources, and thus an optimal society can only be achieved where domestic, regional, and international trade occur, and that such trade can be beneficial to all parties involved.[90] Ghazali was also noted for his subtle understanding of monetary theory and formulation of another version of Gresham's Law.

The power of supply and demand was understood to some extent by various early Muslim scholars as well. Ibn Taymiyyah illustrates:

"If desire for goods increases while its availability decreases, its price rises. On the other hand, if availability of the good increases and the desire for it decreases, the price comes down."[91]

Ghazali suggests an early version of price inelasticity of demand for certain goods, and he and Ibn Miskawayh discuss equilibrium prices.[92] Other important Muslim scholars who wrote about economics include al-Mawardi (1075–1158), Ibn Taimiyah (1263–1328), and al-Maqrizi.

Riba[]

Main article: Riba

The common view of riba (usury) among classical jurists of Islamic law and economics during the Islamic Golden Age was that it is only riba and therefore unlawful to apply interest to money exnatura sua—exclusively gold and silver currencies—but that it is not riba and is therefore acceptable to apply interest to fiat money—currencies made up of other materials such as paper or base metals—to an extent.[93]

The definition of riba in classical Islamic jurisprudence was "surplus value without counterpart." When "currencies of base metal were first introduced in the Islamic world, no jurist ever thought that paying a debt in a higher number of units of this fiat money was riba" as they were concerned with the real value of money rather than the numerical value. For example, it was acceptable for a loan of 1000 gold dinars to be paid back as 1050 dinars of total equal mass. The rationale behind riba according to classical Islamic jurists was "to ensure equivalency in real value" and that the "numerical value was immaterial." Thus an interest rate that did not exceed the rate of inflation was not riba according to classical Islamic jurists.[94]

Ibn Khaldun[]

Main articles: Ibn Khaldun and Muqaddimah
See also: Asabiyyah
File:Ibn Khaldoun.jpg

Statue of Ibn Khaldoun in Tunis

When civilization [population] increases, the available labor again increases. In turn, luxury again increases in correspondence with the increasing profit, and the customs and needs of luxury increase. Crafts are created to obtain luxury products. The value realized from them increases, and, as a result, profits are again multiplied in the town. Production there is thriving even more than before. And so it goes with the second and third increase. All the additional labor serves luxury and wealth, in contrast to the original labor that served the necessity of life.[95]
Ibn Khaldun on economic growth

Perhaps the most well known Islamic scholar who wrote about economics was Ibn Khaldun of Tunisia (1332–1406),[96] who is considered a forerunner of modern economics.[97][98] Ibn Khaldun wrote on economic and political theory in the introduction, or Muqaddimah (Prolegomena), of his History of the World (Kitab al-Ibar). In the book, he discussed what he called asabiyya (social cohesion), which he sourced as the cause of some civilizations becoming great and others not. Ibn Khaldun felt that many social forces are cyclic, although there can be sudden sharp turns that break the pattern.[99] His idea about the benefits of the division of labor also relate to asabiyya, the greater the social cohesion, the more complex the successful division may be, the greater the economic growth. He noted that growth and development positively stimulates both supply and demand, and that the forces of supply and demand are what determines the prices of goods.[100] He also noted macroeconomic forces of population growth, human capital development, and technological developments effects on development.[101] In fact, Ibn Khaldun thought that population growth was directly a function of wealth.[102]

Although he understood that money served as a standard of value, a medium of exchange, and a preserver of value, he did not realize that the value of gold and silver changed based on the forces of supply and demand.[103] He also introduced the concept known as the Khaldun-Laffer Curve (the relationship between tax rates and tax revenue increases as tax rates increase for a while, but then the increases in tax rates begin to cause a decrease in tax revenues as the taxes impose too great a cost to producers in the economy).

Ibn Khaldun used a dialectic approach to describe the sociological implications of tax choices, which is now of course part of economics:

"In the early stages of the state, taxes are light in their incidence, but fetch in a large revenue...As time passes and kings succeed each other, they lose their tribal habits in favor of more civilized ones. Their needs and exigencies grow...owing to the luxury in which they have been brought up. Hence they impose fresh taxes on their subjects...and sharply raise the rate of old taxes to increase their yield...But the effects on business of this rise in taxation make themselves felt. For business men are soon discouraged by the comparison of their profits with the burden of their taxes...Consequently production falls off, and with it the yield of taxation."

This analysis anticipates the modern economic concept known as the Laffer Curve.

Ibn Khaldun also introduced the labor theory of value. He described labor as the source of value, necessary for all earnings and capital accumulation, obvious in the case of craft. He argued that even if earning “results from something other than a craft, the value of the resulting profit and acquired (capital) must (also) include the value of the labor by which it was obtained. Without labor, it would not have been acquired.”[97]

His theory of asabiyyah has often been compared to modern Keynesian economics, with Ibn Khaldun's theory clearly containing the concept of the multiplier. A crucial difference, however, is that whereas for John Maynard Keynes it is the middle class's greater propensity to save that is to blame for economic depression, for Ibn Khaldun it is the governmental propensity to save at times when investment opportunities do not take up the slack which leads to aggregate demand.[104]

Another modern economic theory anticipated by Ibn Khaldun is supply-side economics.[105] He "argued that high taxes were often a factor in causing empires to collapse, with the result that lower revenue was collected from high rates." He wrote:[106]

"It should be known that at the beginning of the dynasty, taxation yields a large revenue from small assessments. At the end of the dynasty, taxation yields a small revenue from large assessments."

Post-colonial era[]

During the modern post-colonial era, as Western ideas, including Western economics, began to influence the Muslim world, some Muslim writers sought to produce an Islamic discipline of economics. Because Islam is "not merely a spiritual formula but a complete system of life in all its walks",[107] it logically followed that Islam also had its own economic system unique from and superior to non-Islamic systems.[3] To date, however, there have been no agreement as to the methodological definition and scope of Islamic Economics.

In the 1960s and 70s Shia Islamic thinkers worked to develop a unique Islamic economic philosophy with "its own answers to contemporary economic problems." Several works were particularly influential,

  • Eslam va Malekiyyat (Islam and Property) by Mahmud Taleqani (1951),
  • Iqtisaduna (Our Economics) by Mohammad Baqir al-Sadr (1961) and
  • Eqtesad-e Towhidi (The Economics of Divine Harmony) by Abolhassan Banisadr (1978)
  • Some Interpretations of Property Rights, Capital and Labor from Islamic Perspective by Habibullah Peyman (1979).[108][109]

Al-Sadr in particular has been described as having "almost single-handedly developed the notion of Islamic economics" [110]

In their writings Sadr and the other Shia authors "sought to depict Islam as a religion committed to social justice, the equitable distribution of wealth, and the cause of the deprived classes," with doctrines "acceptable to Islamic jurists", while refuting existing non-Islamic theories of capitalism and Marxism. This version of Islamic economics, which influenced the Iranian Revolution, called for public ownership of land and of large "industrial enterprises," while private economic activity continued "within reasonable limits." [111] These ideas helped shape the large public sector and public subsidy policies of the Iranian Islamic revolution.

In the 1980s and 1990s, as the Iranian revolution failed to reach the per capita income level achieved by the regime it overthrew, and Communist states and socialist parties in the non-Muslim world turned away from socialism, Muslim interest shifted away from government ownership and regulation. In Iran, it is reported that "eqtesad-e Eslami (meaning both Islamic economics and economy) ... once a revolutionary shibboleth, is indubitably absent in all official documents and the media. It disapperared from Iranian political discourse about 15 years ago [1990]." [109]

But in other parts of the Muslim world the term lived on, shifting form to the less ambitious goal of interest-free banking. Some Muslim bankers and religious leaders suggested ways to integrate Islamic law on usage of money with modern concepts of ethical investing. In banking this was done through the use of sales transactions (focusing on the fixed rate return modes) to achieve similar results to interest. This has been criticised by some western writers as a means of covering conventional banking with an Islamic facade.

Traditional approach[]

While most Muslims believe Islamic law is perfect by virtue of its being revealed by God, Islamic law on economic issues was/is not "economics" in the sense of a systematic study of production, distribution, and consumption of goods and services.

Contemporary economics[]

In modern times, economic policies of the 1979 Islamic Revolution in predominately Shia Iran were heavily statist with a very large public sector, and official rhetoric celebrating revolution and the rights of the dispossessed, although this tendency has faded over time.[112] In Sudan, the policies of the National Islamic Front party dominated regime in the 1990s have been the reverse, employing economic liberalism and accepting "market forces in the formulation of state policies." In Algeria, Jordan, Egypt, and Pakistan, Islamist parties have supported populist policies, showing a "marked reluctance to adopt austerity policies and decreased subsidies." [113] In recent years, Turkey had a rapidly growing economy and became a developed country according to the CIA.[114] Indonesia, Saudi Arabia and Turkey are members of the G-20 major economies.

In 2008, at least $500 billion in assets around the world were managed in accordance with Sharia, or Islamic law, and the sector was growing at more than 10% per year. Islamic finance seeks to promote social justice by banning exploitative practices. In reality, this boils down to a set of prohibitions—on paying interest, on gambling with derivatives and options, and on investing in firms that make pornography or pork.[115]

Another form of modern finance that originated from the Muslim world is microcredit and microfinance. It began in the 1970s in Bangladesh with Grameen Bank, founded by Muhammad Yunus, recipient of the 2006 Nobel Peace Prize.

Land reform[]

One issue "generally absent" from contemporary Islamist economic thought (with the exception of Sayyid Qutb) and action "whether moderate or radical" is the question of agrarian reform. Opposition to agrarian reform even played a role in Islamist uprisings (Iran 1963, Afghanistan, 1978).[116] At least one observor (Olivier Roy) believes this is primarily because it would "imply a reexamination of the concept of ownership", and in particular "throw into question the Waqf, endowments whose revenue ensures the functioning of religious institutions."[116] In the Islamic Republic of Iran, for example, waaf holdings are very large (in Khorasan Province, "50% of the cultivated lands belong to the religious foundation Astan-i Quds, which oversees" the Imam Reza shrine in Mashhad).[116] Thus questioning waaf property would mean questioning "the foundation of the financial autonomy of the mullahs and mosques", particularly among Shia Muslims.[116]

Finances[]

  • Dow Jones Islamic Fund
  • Dow Jones Islamic Index

Banks[]

  • Islamic Development Bank
  • Bank Islam Malaysia
  • Bank Muamalat Malaysia
  • Dubai Islamic Bank
  • Islamic Bank of Britain
  • Meezan Bank Limited

Notes[]

  1. Roy, The Failure of Political Islam Harvard University Press, 1994, p.132
  2. Schirazi, Asghar, Constitution of Iran, (1997), p.170
  3. 3.0 3.1 Michael Bonner, "Poverty and Economics in the Qur’an", Journal of Interdisciplinary History, xxxv:3 (Winter, 2005), 391–406
  4. Jawed A. Mohammed PhD and Alfred Oehlers (2007), Corporate social responsibility in Islam, School of Business, Auckland University of Technology.
  5. Ajmal Bhatty, President & Chief Executive Officer, Tokio Marine Middle East, Takaful Summit 2011.
  6. Omar Fisher and Dawood Y.Taylor (April 2000). "Prospects for Evolution of Takaful in the 21st Century: Origins of Takafu". President and Fellows of Harvard College.
  7. Badr, Gamal Moursi (Spring, 1978), "Islamic Law: Its Relation to Other Legal Systems", The American Journal of Comparative Law 26 (2 - Proceedings of an International Conference on Comparative Law, Salt Lake City, Utah, February 24–25, 1977): 187–198 [196–8], Error: Bad DOI specified
  8. (Gaudiosi 1988)
  9. (Gaudiosi 1988, pp. 1237-40)
  10. (Gaudiosi 1988, p. 1246)
  11. (Gaudiosi 1988, pp. 1246-7)
  12. (Gaudiosi 1988, p. 1247)
  13. (Hudson 2003, p. 32)
  14. (Gaudiosi 1988, pp. 1244-5)
  15. Micheau, Francoise, "The Scientific Institutions in the Medieval Near East", pp. 999–1001, in (Morelon & Rashed 1996, pp. 985-1007)
  16. 16.0 16.1 Crone, Patricia (2005), Medieval Islamic Political Thought, Edinburgh University Press, pp. 308–9, ISBN 0748621946
  17. 17.0 17.1 17.2 John M. Hobson (2004), The Eastern Origins of Western Civilisation, p. 29-30, Cambridge University Press, ISBN 0521547245. Cite error: Invalid <ref> tag; name "Hobson-29-30" defined multiple times with different content
  18. 18.0 18.1 Subhi Y. Labib (1969), "Capitalism in Medieval Islam", The Journal of Economic History 29 (1), p. 79-96.
  19. S. A. H. Ahsani (July 1984). "Muslims in Latin America: a survey", Journal of Muslim Minority Affairs 5 (2), p. 454-463.
  20. Roman K. Kovalev, Alexis C. Kaelin (2007), "Circulation of Arab Silver in Medieval Afro-Eurasia: Preliminary Observations", History Compass 5 (2), pp. 560–80.
  21. Mayor of London (2006), Muslims in London, p. 14, Greater London Authority.
  22. 22.0 22.1 22.2 22.3 22.4 Zohor Idrisi (2005), The Muslim Agricultural Revolution and its influence on Europe, FSTC.
  23. (Shatzmiller 1994, p. 263)
  24. Andrew M. Watson (1974), "The Arab Agricultural Revolution and Its Diffusion, 700–1100", The Journal of Economic History 34 (1), pp. 8–35 [9].
  25. Shatzmiller, Maya (1994), Labour in the Medieval Islamic World, Brill Publishers, pp. 63-4 & 66, ISBN 90-04-09896-8, "At the same time, the “demographic behaviour” of the Islamic society as an agricultural society varied in some significant aspects from other agricultural societies, particularly in ways which could explain a decline in birth rate. It is agreed that all agricultural societies conform to a given demographic pattern of behaviour, which includes a high birth-rate and a slightly lower death-rate, significant enough to allow a slow population increase of 0.5 to 1.0 per cent per year. Other demographic characteristics of this society are high infant mortality, with 200-500 deaths per 1000 within the first year of birth, a lower average life expectancy, of twenty to twenty-five years, and a broadly based population pyramid, where the number of young people at the bottom of the pyramid is very high in relationship to the rest of the population, and that children are set to work at an early stage. Islamic society diverged from this demographic profile in some significant points, although not always consistently. Studies have shown that during certain periods, such factors as attitudes to marriage and sex, birth control, birth and death rates, age of marriage and patterns of marriage, family size and migration pattems, varied from the traditional agricultural model. [...] Life expectancy was another area where Islamic society diverged from the suggested model for agricultural society."
  26. "Life expectancy (sociology)", Encyclopædia Britannica, http://www.britannica.com/eb/topic-340119/life-expectancy, retrieved 2010-04-17, "In ancient Rome and medieval Europe the average life span is estimated to have been between 20 and 30 years."
  27. Shatzmiller, Maya (1994), Labour in the Medieval Islamic World, Brill Publishers, p. 66, ISBN 90-04-09896-8, "Life expectancy was another area where Islamic society diverged from the suggested model for agricultural society. No less than three separate studies about the life expectancy of religious scholars, two from 11th century Muslim Spain, and one from the Middle East, concluded that members of this occupational group enjoyed a life expectancy of 69, 75, and 72.8 years respectively!"
  28. Shatzmiller, Maya (1994), Labour in the Medieval Islamic World, Brill Publishers, p. 66, ISBN 90-04-09896-8
  29. Bulliet, Richard W. (April 1970), "A Quantitative Approach to Medieval Muslim Biographical Dictionaries", Journal of the Economic and Social History of the Orient (Brill Publishers) 13 (2): 195–211 [200]
  30. Ahmad, Ahmad Atif (2007), "Authority, Conflict, and the Transmission of Diversity in Medieval Islamic Law by R. Kevin Jaques", Journal of Islamic Studies 18 (2): 246–248 [246], Error: Bad DOI specified
  31. Shatzmiller, Maya (1994), Labour in the Medieval Islamic World, Brill Publishers, p. 66, ISBN 90-04-09896-8, "This rate is uncommonly high, not only under the conditions in medieval cities, where these ‘ulama’ lived, but also in terms of the average life expectancy for contemporary males. [...] In other words, the social group studied through the biographies is, a priori, a misleading sample, since it was composed exclusively of individuals who enjoyed exceptional longevity."
  32. Conrad, Lawrence I. (2006), The Western Medical Tradition, Cambridge University Press, p. 137, ISBN 0521475643
  33. Andrew J. Coulson, Delivering Education, Hoover Institution, p. 117, http://media.hoover.org/documents/0817928928_105.pdf, retrieved 2008-11-22, "Reaching further back through the centuries, the civilizations regarded as having the highest literacy rates of their ages were parent-driven educational marketplaces. The ability to read and write was far more widely enjoyed in the early medieval Islamic empire and in fourth-century-B.C.E. Athens than in any other cultures of their times."
  34. Edmund Burke (June 2009), "Islam at the Center: Technological Complexes and the Roots of Modernity", Journal of World History (University of Hawaii Press) 20 (2): 165–186 [177-8], Error: Bad DOI specified, "The spread of written knowledge was at least the equal of what it was in China after printing became common there in the tenth century. (We should note that Chinese books were printed in small editions of a hundred or so copies.)"
  35. Andrew J. Coulson, Delivering Education, Hoover Institution, p. 117, http://media.hoover.org/documents/0817928928_105.pdf, retrieved 2008-11-22, "In neither case did the state supply or even systematically subsidize educational services. The Muslim world’s eventual introduction of state funding under Nizam al-Mulk in the eleventh century was quickly followed by partisan religious squabbling over education and the gradual fall of Islam from its place of cultural and scientific preeminence."
  36. Edmund Burke (June 2009), "Islam at the Center: Technological Complexes and the Roots of Modernity", Journal of World History (University of Hawaii Press) 20 (2): 165–186 [177], Error: Bad DOI specified, "According to legend, paper came to the Islamic world as a result of the capture of Chinese paper makers at the 751 C.E. battle of Talas River."
  37. Edmund Burke (June 2009), "Islam at the Center: Technological Complexes and the Roots of Modernity", Journal of World History (University of Hawaii Press) 20 (2): 165–186 [177], Error: Bad DOI specified, "Whatever the source, the diffusion of paper-making technology via the lands of Islam produced a shift from oral to scribal culture across the rest of Afroeurasia that was rivaled only by the move from scribal to typographic culture. (Perhaps it will prove to have been even more important than the recent move from typographic culture to the Internet.) The result was remarkable. As historian Jonathan Bloom informs us, paper encouraged "an efflorescence of books and written culture incomparably more brilliant than was known anywhere in Europe until the invention of printing with movable type in the fifteenth century."
  38. Edmund Burke (June 2009), "Islam at the Center: Technological Complexes and the Roots of Modernity", Journal of World History (University of Hawaii Press) 20 (2): 165–186 [178], Error: Bad DOI specified, "More so than any previously existing society, Islamic society of the period 1000–1500 was profoundly a culture of books. [...] The emergence of a culture of books is closely tied to cultural dispositions toward literacy in Islamic societies. Muslim young men were encouraged to memorize the Qur'an as part of their transition to adulthood, and while most presumably did not (though little is known about literacy levels in pre-Mongol Muslim societies), others did. Types of literacy in any event varied, as Nelly Hanna has recently suggested, and are best studied as part of the complex social dynamics and contexts of individual Muslim societies. The need to conform commercial contracts and business arrangements to Islamic law provided a further impetus for literacy, especially likely in commercial centers. Scholars often engaged in commercial activity and craftsmen or tradesmen often spent time studying in madrasas. The connection between what Brian Street has called "maktab literacy" and commercial literacy was real and exerted a steady pressure on individuals to upgrade their reading skills."
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