Asutay ISEFAM-IE-LH 5-Islamic Moral Economy PDF

Sakarya University
Faculty of Economics and Business Administration

ISEFAM
MSc in Islamic Economics and Finance

Islamic Economics
2021/2022
Lecture Handout 5:
An Introduction to Moral Economy and
Rationalising Islamic Moral Economy
Mehmet Asutay
mehmet.asutay@durham.ac.uk
Autumn 2021
Islamic Economics Please do not circulate, only for the class
Sakarya University, ISEFAM
DEFININING MORAL ECONOMY

• “Moral economy studies the moral norms and sentiments that structure
and influence economic practices, both formal and informal”. (Sayer,
2007: 262)
• Since ‘social good’ is one of the main thrusts of moral economy, social
goods are defined as ‘objects and qualities whose possession or
consumption confers some kind of benefit and satisfies human needs
and wants”. (Arnold, 2001: 90)
• Sawyer (2000: 79) – moral economy represents “norms and sentiments”
concerning “the responsibilities and rights of individuals and institutions
with respect of others”, which “should go beyond matters of justice and
equality to conception of the good, for example, regarding the needs and
the ends of economic activity”, including “the treatment of
environment”.
Mehmet Asutay 1 Autumn Term 2021
• Thus, ‘moral economy’ can be defined as a collective action that

distributes social goods to all because it considers moral and
ethical norms in its economic practices.
• The main point of a ‘moral economy’ is, hence, to create a fairer
economic model by the norms of a particular society.
• An important feature of a moral economy is embeddedness’ (Booth,
1994), brought upon Polanyi’s criticism of the market economy.
• In the history, economy was “submerged” in social relationships or a
general structure of society, which explains the concept of
“embeddedbess” (Polanyi, 1957: 46).

• Since in a market economy all is subjected to “the law of the market”,

then, the “organic forms of existence” – non-contractual social
relations, which are based on trust and reciprocity, such as kinship,
the neighbourhood, and creed – are in the brink of elimination for
they are seen as a hindrance of individual freedom and the profit
maximisation in the market economy.
• This detached relationship with society is what makes the economy
dis-embedded (Harvey et al., 2007).
• Thus, moral economy is originally linked, as a concept, with the
normative concept of subsistence ethics, reciprocity,
community, embeddedness, ethicality, non-fictitious
commodities, and no-commodification.

INTERDISCIPLINARY PERSPECTIVES ON MORAL ECONOMY
(i) Philosophy: some analytical distinctions;
(ii) Political philosophy and political economy: what is the

relationship between market economies and moral economies?

SENSES OF ‘MORAL ECONOMY’
• An approach to the study of an object

• A discipline defined by an object of study
• A particular kind of economy

MORAL ECONOMY: AN APPROACH TO THE STUDY OF AN OBJECT
(i) Moral economy is the application of ethical categories to the study of

the economy.
– The elimination of ethical concepts in neo-classical economics leads
to the ‘descriptive impoverishment’ of economics. (Sen, 1978 p.185;
1980 p.362).
– ‘When economists spoke “qua economist” …they tried to speak in a

value-free “scientific” language with “expletives” deleted.’ (Sen 1980
pp.363-4).

– ‘The fact-value dichotomy …. penetrated neo-classical economics

after 1932… [with] the resultant impoverishment of welfare
economics’ ability to evaluate what it was supposed to evaluate—
economic wellbeing. (Putnam, 2002, p.62)
– Economics needs to rediscover the ethically ‘rich descriptions’ that

marked the work of Adam Smith, the early Marx etc. (Sen, Putnam,
Walsh, Nussbaum)
(ii) Moral economy is the application of economic categories to the

study of ethics – the use of rational choice models, game theory etc. to
explain the development of moral norms.

MORAL ECONOMY: A DISCIPLINE DEFINED BY AN OBJECT OF

STUDY
• Moral economy is the study of the ethical character of

economic life.
– Moral economy is ‘the critical study of the ethical
character of economic activities and relationships, and of
how this shapes and is shaped by other dimensions of
social and political life’.

MORAL ECONOMY: A PARTICULAR KIND OF ECONOMY
• Moral economy comprises a particular set of relationships,

beliefs and norms that constitute a particular kind of
economic life.

THE FEATURES OF MORAL ECONOMY

§ Embeddedness or non-economic factors
§ Non-fictitiousness
§ No commodification
§ Redistribution
§ Reciprocity
§ Community and charity
§ Convention and coordination
§ Collective action: cooperation including labor sharing
“They know the price of everything but the price of nothing” - Oscar Wilde
”It is not the prices that determine everything, but everything that determines
prices” - Bourdieu (2005)

Contextualising Moral Economy:
The moral economy of the English crowd - E. P. Thompson

• It is … true that riots were triggered off by soaring prices, by
malpractices among dealers, or by hunger. But these grievances
operated within a popular consensus as to what were legitimate and
what were illegitimate practices in marketing, milling, baking, etc.
This in its turn was grounded upon a consistent traditional view of
social norms and obligations, of the proper economic functions of
several parties within the community, which, taken together, can be
said to constitute the moral economy of the poor.

Contextualising Moral Economy:

The Moral Economy of the Peasant- J. Scott
• Ethics of subsistence
• “The precapitalist community was … organized around this
problem of the minimum income – organized to minimize the risk
to which its members were exposed by virtue to its limited
techniques and the caprice of nature. Traditional forms of patron-
client relationships, reciprocity, and redistributive mechanisms
may be seen from this perspective…”

POLANYI AND THE GREAT TRANSFORMATION (1944)

Polanyi (1944) in analysing the past societies, concludes that until the
emergence of self-regulated market economy or until the ‘great
transformation, the economies in the West were submerged or
embedded economies.
• The embedded economy nature existed since primitive-archaic

time;
• Economy was submerged in social formation and is determined by
non-economic factors;
• However, the creation of self-regulated market, dis-embedded
resulting into the creation of fictitious commodities through
commoditisation;

• Polanyi’s thesis that the market economy is a disembedded

economy, in which
• disembeddedness means the predominance of transactions
and social interactions that are not submerged in social
relationships but are based on economic self-interest; and
• disembeddedness also means the absence of social control
over the economic process of production and distribution.
• As a result, the constitution of the idea of market economy caused
the malaise of society by changing the social formation of
societies;
• The traditional forms of economy have always been moral
economy through its traditional social formation;

• Therefore, the struggle of re-embedding economy in society and

rescuing labour, land and money from the ‘fictions commodity’ or
de-commodificating them has been the aim of protective social
movements and anti-liberal discourses;
• Islamic moral economy, hence, is another part of such double
movement/counter movement to re-embedding the economy to
ensure the dignity of labour and fair distribution of resources;

• Polanyian discourse is essential for us to understand the

emergence of Islamic moral/political economy/Islamic economics
through embeddedness (embeddness in normative world of Islam
beyond economic/rational factor) through essentialising sharing
and collaborative economy, economy, sustainable economy,
demand reduction, de-growth society, destructive/counter
hegemonic business practices, profit-loss-sharing; risk sharing;
and asset based financial transactions.
• Polanyian approach - such a traditional social formation and

political economy is dependent on the centricity of social morality,
symmetry, and self-sufficiency.

POLANYI AND THE GREAT TRANSFORMATION (TGT) (1944):

FURTHER REFLECTION
§ TGT argues that the neoliberal market economy system separated

the economy from its historical social relations by limiting the
economy to be the sphere of market-oriented actions.
§ Polanyi articulates four characteristics of the momentum of the
emergent homogenizing civilization design:
§ the balance-of-power,
§ the international gold standard,
§ the self-regulating market, and
§ the liberal (nation) state.

§ Clark (2008) highlights

“the free market to be enemy of humanity in TGT. It was an alien
form of social organisation; by displacing the natural social state
and idyllic system of natural obligations that bound and protected
individuals the free market brought inequality, war, oppression,
and social turmoil to just and peaceful societies.”
§ TGT has two essential key points, the first one is the notion of
embedded system, and the second is the double movement
approach.

§ Polanyi conceptualised the emergence of liberal economy principle

of laissez-faire in the form of
§ self-regulating market which transformed labour, land, and
money to fictitious commodities for the economic relations,
§ international gold standard emerged to force society to be
dependent on this new order by leaving no other alternative in the
nation-state political realm.

§ Accordingly (Polanyi-Levitt 2013):

§ the industrial revolution was the first turning point of
transformation of society,
§ the international gold system conceptualised by the Bretton
Woods system turned the market economy into a global
capitalist economy
§ developed the neoliberal order thorough financialization, as the
second great transformation.

§ This new liberal economic system is guaranteed by the modern

nation-states as a part of the market society and the guardian of
the liberal mechanism.
§ The problem is not exactly the market mechanism, which exists
since the human civilization; deadlock is here the market system as
the disembedded system articulating and operating with the liberal
principles.
§ The past societies produced for their own needs - manufacturing
was not based on profit but rather based on natural relationship in
society around solidarity (Hann 2015).

§ The self-regulating market economy is

“an entirely new institutional mechanism was starting to act on
Western society. All transactions are turned into money
transactions, and these, in turn, require that a medium of
exchange be introduced into every articulation of industrial life”
(Polanyi 2001: 42-44).
§ The market system ignores the social relations - such as human
institutions and traditions, culture, rituals, and religious precision - in
identifying the operational framework of economy as a process of
market-liberal-society without consultation of political economy
(Adelman 2020).

§ The new order sees labour, nature, and money as part of the product
and uses those elements to make commodity/profit - Polanyi
indicates that this is in contradiction to human nature and those
factors do not exist for the productions which are essential for the
industry.
§ Converting and expressing human as a commodity is against
society’s character, which is the causative of the collapse of moral
and solidarity (Scot 1976; Thompson 1971).
§ Nature itself is not an essential element for the industry which links
with human needs. For example, in the traditional moral economy,
knowledge and art are for society, and hence intellectual and artist
exist for society on the basis of correlative relation.

§ In the market economy, they became a commodity which will be

fictional. It will destroy society’s essentials and psychology.
§ Due to the political power behind market system, society cannot
create an alternative to the market system without disembedding
the economy from capitalism.
§ From G-M-G embedded economy to M-C-M market economy.
§ In the Polanyian human economy approach, the liberal economy is
not spontaneously developed and always shaped and controlled by
authorities or organisations, to control and graft the market
according its evolving needs, and also always has been an
interference-will end to crush with society, because of this economic
system has been working against human nature.

§ That composed Polanyi’s most appraisement concept, the double

movement so that at least the consequences of market system can
be moderated through double movement rescuing land, labour and
nature.
§ Society glides to another way to find a way against the unnatural
system by developing protective response and establish alternative
reactions, but sometimes consequence is an unwanted predicament,
such as fascism, authoritarianism, and right-wing populism along
with the successful welfare state and trade unions to rescue human
and labour.

A PARTICULAR KIND OF ECONOMY

• A moral economy is an economy that is embedded in or oriented
by moral norms;
• Claim by both critics and defenders of market economies: markets
are not moral economies in this sense. Markets are ‘ethics free
zones’;
• Contrast of market and household (Aristotle, Polanyi, Marx)
• Contrast with ‘domestic moral economy’?;
• Market economies disrupt the moral economies of pre-capitalist
societies;
• Is this view of markets defensible?

MARKET ECONOMIES AS MORAL ECONOMIES?

• The choices of agents are made in response to the relative prices of goods;
• Choices are constrained and regulated by the movements in the
exchange values of different goods;
• The exchange value of objects becomes a common unit through which
decisions are made;
• The shifts in exchange values are the unintended consequence of the
collective outcomes of individual actions of agents;
• Hence, they are independent of any social or ethical ends that might be
held either individually or in common, e.g. there is no ‘just price’;
• Market economies are in this special sense ‘disembedded economies’:
decisions are not constrained directly by social custom and ethical goals,
but rather respond to a system that proceeds independently of these.

Morality and markets: a response (T. M. S. Smith)

• Market economics have certain ethical prerequisites if they are to exist at
all:
– Property relies on the mutual recognition of rights;
– Contracts, if they are not always to be backed by the sword, require
mutual trust between agents;
– While positive beneficence may not be necessary for commercial
society, the rules and sentiments of justice governing negative
responsibilities to avoid harming others are a necessary condition.

Markets as a moral sphere?

• Markets form an ethical sphere in which free agents enter into
voluntary contractual relations with each other that involve mutual
recognition and respect of each other as free, independent and
autonomous beings:
– Virtues of independence (Smith)
– Contract as a relation in which individuals ‘recognise each other
as persons and property owners’ (Hegel)
– Self-ownership (Locke, Nozick)

Markets as sphere of independence

• “Nothing tends so much to corrupt and enervate and debase the
mind as dependency, and nothing gives such noble and generous
notions of probity as freedom and independency. Commerce is
one great preventative of this custom” (Adam Smith‘s Lectures on
Jurisprudence, 1982: 333, Liberty Fund [1978, Oxford University
Press edition]; specifically, this quotation is from Smith’s lecture of
March 28, 1763);

• Commercial society fosters the Stoic virtues of independence;

• ‘Every man, as the Stoics used to say, is first and principally
recommended to his own care; and every man is certainly, in every
respect, fitter and abler to take care of himself than of any other
person’.
• Through market relations we recognise others as independent
agents of standing, towards whom we act neither as benefactor
nor as dependent.
• In market society, therefore, there is a mutual recognition of
independence.

Wealth of Nations
• ‘Commerce and manufactures gradually introduced ... the liberty
and security of individuals, among the inhabitants of the country,
who had before lived almost in a continual state …. of servile
dependency upon their superiors. This, though it has been the least
observed, is by far the most important of all their effects’ (Adam
Smith, in The Two Narratives of Political Economy, edited by
Nicholas Capaldi and Gordon Lloy, 2011: 130)
• [The great proprietor] is at all times...surrounded with a multitude

of retainers and dependants, who, having no equivalent to give in
return for their maintenance, but being fed entirely by his bounty,
must obey him...' (Adam Smith)

• Through exchange and the division of labour, the interdependence

of individuals is disassociated from personal dependence.
• ‘Though [the wealthy person] contributes, therefore, to the

maintenance of them all, they are all more or less independent of
him, because generally they can all be maintained without him.’

Markets, moral economies and ethical economies

Possible response:
• Market exchanges are not orientated by a direct regard for the
satisfaction of human needs or the realisation of human goods and
virtues.
– Ethics concerned with the good - with human flourishing and
virtues
– Morality: concerned with the right – with the norms that
govern procedurally fair transactions between persons.
• Market economies may be ‘moral economies’ but not ‘ethical
economies’;
• Remember moral is the ethical applications in everyday life.

Two liberal responses

• Neutrality
• The paradox of ethics: ethically superior outcomes are the
result of institutions that are not themselves oriented towards
ethical ends.

Markets and neutrality

• It is not a vice but a merit of market economies that they do
not promote human goods and virtues.
• In modern pluralistic societies, public institutional
arrangements should be neutral between different
conceptions of the good, and the market offers such an
institutional arrangement.

Hayek and the ‘great society’

• ‘The Great Society arose through the discovery that men can live
together in peace and mutually benefiting each other without agreeing
on the particular aims that they severally pursue. The discovery that by
substituting abstract rules of conduct for obligatory concrete ends made
it possible to extend the order of peace beyond the small groups
pursuing the same ends, because it enabled each individual to gain from
the skill and knowledge of others whom he need not even know and
whose aims could be wholly different from his own.’ (Hayek, LLL, p.109)

Markets and the paradox of ethical life?

• Commercial society is driven by the pursuit of ‘the gratification
of... vain and insatiable desires’ that corrupts the character’;
• It creates the conditions for the development and wide distribution
of goods required for human welfare and promotes mankind ‘to
cultivate the ground, to build houses, to found cities and
commonwealth, and to invent and improve all the sciences and
arts which ennoble and embellish human life’ (Smith TMS, IV.1.10);
• Virtues of independence.

Marx
• The question is always which mode of property creates the best
citizens…[T]he old view, in which the human being appears as
the aim of production... seems to be very lofty when contrasted to
the modern world, where production appears as the aim of
mankind and wealth as the aim of production. In fact, however,
what is wealth other than the universality of human needs,
capacities, pleasures and productive capacities etc., created
through universal exchange (Grundrisse, pp. 487–8).

Smith and the tensions of commercial society:

• Internally corrosive tendency within market economics to foster
forms of character and relationship that are incompatible with the
flourishing of the practices and virtues which markets are taken to
engender.
• Exhibited in the continuing conflicts in the scope of market
societies.

EMBEDDEDNESS AS PART OF SUBSTANTIVIST MORAL

ECONOMY
• In pre-capitalist economies, the process of production was more or
less embedded in a wide variety of institutions such as the family,
neighborhood, community
• Embeddedness nature of pre-capitalist production led Polanyi to
distinguish forms of economic life in terms of their respective
principles of distribution rather than in terms of their social
relations of production
• In Polanyi’s explanation of the former societies, economy in general
and production in particular cannot be disentangled from other
social activities

• The rise of capitalism led to the emergence of an autonomous

market economy operating according to a profit-maximising
economic logic regardless of social norms and values, hence
resulting into disembedded economy
• “That the behavior and institutions to be analysed are so
constrained by ongoing social relations that to construe them as
independent is a grievous misunderstanding” (Granovetter, 1985);
• Markets are necessarily limited by institutional regulations, which
connect them to the moral fabric of society;
• The reference point of embeddedness is not the economy as such,
but according to Barber (1995) “the larger social systems in which
all economies are located”.

DIMENSIONS OF EMBEDDEDNESS
Dimension Definition
Relational Relational embeddedness refers to the quality of the relationship and
highlights the effects of cohesive ties between social actors on their economic
actions
Structural Structural embeddedness captures the impact of the structure of relations
around social actors on their economic actions
Positional Positional embeddedness captures the impact of the position social actors
occupy in the overall structure of the network on their economic actions
Cognitive Cognitive embeddedness refers to the ways in which common mental models
or a shared vision among social actors impact their economic actions
Cultural Cultural embeddedness captures the impact of ideologies of markets, industry
cultures and management logics on the actions of the social actors
Political Political embeddedness refers to the impact of power struggles and
sanctioning mechanisms on the economic actions of the social actors
Source: Adopted and developed from Marx (2004: 65)

DEFINING IQTISAD VS ECONOMICS – IQTISAD CONSTITUTES

MORAL ECONOMY
§ Definition of iqtisad enables us to understand as to why Islamic
economics is not perhaps the right terminology.
§ Iqtisad as an Arabic word comes from the root of ‘qasd’;
§ Qasd means ‘directing towards an objective’, ‘true path’, ‘in line
with an aim’, ‘equable’ and ‘temperate’ (showing moderation or
self-restraint).
§ Iqtisad also related to ‘qist’ which implies ‘just share’ and hence
‘justice’. In this context, iqtisad, relates ‘to giving the right of
everything’, ‘to locate everything in its place’, and hence
‘establishing justice’.

§ Hence, iqtisad relates to directing towards an objective – namely

emancipation and empowerment so that human-centred
development can be essentialised and economic life can be
embedded in the social formation of the society.
§ Iqtisad, thus, relates to philosophical foundation and theoretical

articulation.
§ Economics as a word originates from Greek ‘oiko’ (home) and

‘nomia’ (norms and rules); hence economics relates to everyday
practice and does not relates to philosophy and theory.

§ Based on the definition of Islamic economics, its principles, values,

norms, rules, and institutions, Islamic economics fulfils the features
of the moral economy on every aspect, as it is infused with Islamic
ethical norms and values which mainly emphasise social justice and
human well-being with the objective of defining a particular modes
of production embedded within an Islamically authenticated social
formation in which ihsan determines the nature of ‘good society’
beyond Islamic social justice and equity.
§ Iqtisad hence refers to a particular worldview and articulation of

that worldview and hence relates to the moral economy of Islam.

ISLAMIC ECONOMICS/FINANCE AS A MORAL ECONOMY OF

EMBEDDEDNESS
• The ontological and epistemological sources provide the axioms and
foundational principles that define the moral framework
• The axiomatic approach together with its political economy outline
the boundary of the behaviour of the economic agents and features
of Islamic moral economy;
• The axioms, along with the political economy of Islamic economics
structure, constitute a value system and normative world in
determining the nature a particular (Islamic) social formation which
determines the embeddedness in the society;

• The axioms form or constitute the embeddedness as a social

formation as an implication to produce social justice and social
goods in harmony with the interest of individuals and society;
• The axioms form the base to make sure that non-economic factors
should also determine economic and financial behaviour and
decision-making; as well as considering spiritual and material well-
being;
• The axioms essentialise to reject the idea of commodification, and
rejecting fictitious commodities which undermines the social
balance;

• The axioms surely fulfil moral economy’s reciprocity feature through

essentialising ‘socialisation’; however, they do not impose a
particular socialisation or over socialisation, fard, or mandatory, and
expected voluntary nature is identified, while reaching falah directly
refers excelling in ihsan through voluntary action;
• The axioms as the normative world of IME essentalise and response
to community and charity nature of moral economy, as communal
or social good and socialisation is considered as the crucial
foundation of within Islamic normative world;
• Essentialisation of convention and coordination as moral economy
features is also the outcomes of these axioms, which evidences the
constitution of IME frame.

• For example, maqasid al-Shari’ah aims to produce morally outcomes

through coordinating and integrating the axioms within the
normative world of Islam through the convention oriented
substance of the axioms
• An important feature of ‘collective actions’ is aimed at by all the
axioms and in particular by takaful, ukhuwah, khilafah, tazkiyah, and
rububiyah among others.

REFLECTING ON THE AXIOMS GENERATING A MORAL ECONOMY

– OR IQTISAD
• The axioms explained earlier are the most important spiritual elements
that should be in one’s inner soul but also articulated in everyday acts
including in economic and financial acts, which constitute the micro
dynamics of the economic system in the hope and anxiety of receiving
consequences in the hereafter.
• Due to such a moral orientation, Islamic economic system is truly different
and is an alternative to the conventional economic system.
• Reasoning from the fundamental doctrine of Islamic economy, it could be
concluded that Islamic economy falls under the science of moral economy
that deems the intersection of moral values, cultural beliefs and economic
activities as encouraging on socially responsible financial transactions thus
leading it to be presented as an IME (Tripp, 2006).

• However, the idea of interrelating these two branches of knowledge

was part of the practise of the Islamic social movements in Egypt a
long time ago, which dissociates it from being the Marxists idea
(Utvik, 2006: 35 - 36).
• The moral values imprinted in Islamic economy are derived from the
ontological and epistemological sources of Islam, based on divine
knowledge.
• The idea brought up by Tripp (2006) represents the ideal concept of
Islamic economics which gives priority to the concept of morality
and social justice as paramount, but which does not fail to achieve
materially.
• On the other hand, Utvik (2006: 36 - 37) suggests two expressions for
the moral economy: the ‘weak’ and the ‘strong’.

• Describing the weaker moral economy, Utvik considers that a moral

society has the ability to progress with great achievements because
of the faith in God (taqwa).
• Describing the stronger moral economy, inflict that every act and
economic transaction must be morally and ethically acceptable
despite the belief in God.
• In general, therefore, it seems that, Islamic economy would fall
under the strong category in an aspirational sense, while the current
practise of Islamic finance indicates a weaker moral economy.
• Islamic values require that the welfare of the individual (maslahah al-
fard) should be promoted alongside the public interest (al-salih al-
‘amm).

• Clearly a taqwa-centric individual balance equally himself and the society

whereby he never neglects his own interest and also never exploits the
society; thus he achieves an optimality between individual and social
interest by removing the perceived conflict as stated by conventional
economics.
• The described Islamic character is the expected pattern for Muslim
behaviour according to faith and to avoid from the temptations of
Capitalism and Communism (Tripp, 2006: 122 - 123).
• This personality is clearly mentioned by Al-Sadr and is created by forming
alternative banking i.e. an Islamic bank, to realise the ideal goal of Islamic
economics which must be rooted in the Muslim individual itself and which
must equip them with both moral values prescribed by God: being pious
(taqwa), and also the science of economics (Tripp, 2006: 135).

• Tripp (2006: 123) introduces in his writings the ‘Islamic Calculus’,

which is an essential mechanism that should be embedded in each
individual Muslim to make him assume all responsibility for his own
individual not only in this world but also in the hereafter as the
outcome of spiritual accountability.
• In addition, Utvik (2006: 35) believes that having faith in God is the
only potential drive to ensure people contributing morally to the
society. It is the secret that motivates good behaviour towards
others.
• For example, the responsibility of paying zakah which is obligatory
in Islam, has a greater impact on one’s conscience than paying tax,
which is a duty people somehow tend to avoid and neglect for no
reason.

• Tripp (2006: 148) states that for the Muslim ummah in upholding the
absolute sociability, solidarity and ethicality is not a historical reality;
• In fact, this is an inspirational power that was taught by the Prophet
and which has been retained throughout the centuries.
• In this sense, it is believed that Islamic economic utopia could be
realised although not in the near future but will come into practise
through individuals upholding such values in their everyday lives.
• Thus, Islamic economics/iqtisad suggests a particular moral
economy submerged into the social formation of Muslim societies
shaped by the normative worldview of Islam.


MEDINA MARKET AS THE FOUNDATION OF ISLAMIC MORAL

ECONOMY
• No state – but covenants for governance
• No accumulation (al-kanz) (individual and institutional) and no
surplus transfer role of any authority
• Sharing economy as the political economy of Islam, as identified in
the relationship established between ansar and muhajir after the
Hijra by the Prophet.
• Medina Market established by the Prophet Muhammad himself
• Market as a Sphere/Mechanism vs Market as a System
• Location was particularly chosen by the Prophet
• Market opened to an area adjacent to a graveyard – reminding
the social accountability and hereafter

• Open space/transparent
• No taxation (no state and hence no jusrisdicti0n)
• No permanent space for the trades people to prevent rent
extraction
• No competition – but cooperation
• No price ceilings (narh) due to embeddedness as price emerge is
through the embeddedness due to Islamic social formation based
on substantive morality
• Prevention of talaqqi al rukban (an exploitative commercial
arbitrage) - local traders were prohibited to meet the caravans
outside to purchase their goods before they reached the Medina
market; hence, local traders were prevented to exploit caravans
to gain excessive profit due to the lack of information compared
to the local market.
• Hisba – ensuring Islamic morality dominates in the market

resulting into embeddedness
• Dispossessedness - prevention of accumulation/prohibition of al-
kanz
• Universal Income through bait ul-mal, zakat within its authentic
meaning implies returning the right of the society to society as a
compensation for the expropriation of the resources created by
Allah by privatisation.

POST PROPHET PERIOD

• Continuation of the Prophetic tradition
• War against zakat avoiding tribes/communities
• Prevention of accumulative political economy.
o After the conquest of the Syrian Land, the Khalif Omar
suspended the Qur’anic verses on the distribution of bounty to
the members of campaign to prevent capital accumulation/al-
kanz and domination.
• Gradual emergence of territoriality of administration and conflict
over the role of bait ul-mal
o Abu Dharr Al-Ghiffari as the champion of non-accumulative
administrative system (no surplus) and championing the
continuation of the use of bait ul-mail to sustain equilibrium in
the society
INSTANCES OF MORAL ECONOY FROM THE MUSLIM HISTORY

• Market as a sphere of embeddedness
• Market as a mechanism and sphere of exchanges and not an
independent system- market does not have an independent logic
beyond the given logic by the value system (Islamic logic)
• Ifta Institution – Scholarship Institutions to protect the civil society
• The fallacies created over competition and the market economy in
reading history
• Ibn Taymiyah – ‘price of market is the price of Allah’
• the price he refers is the product of an embedded market
through Islamic logic
• This is the price of embedded moral economy including the
inherent value

• Ibn Taymiyah did not refer to the supply-demand conditions of

the market system
• Historical zakat collection fallacy – Other than the Prophetic and
Early period of the Sultanate state, zakat collection and
management was handled by civil society including during the
Ottomans – state did not consider expropriating zakat for its
treasury for social welfare.
• Guilds in general and Ahilik (in Ottoman Empire) as the moral
regulative authority to prevent competition and deviation in the
market sphere
• Until Enlightenment changing the paradigm in the West, the
Muslim world was at par with Europe.

FORMS OF ISLAMIC MORAL ECONOMY: HISBAH AND AHILIK

INSTITUTIONS
• Hisbah as a regulative institution in the Muslim world: hisbah
institution was to subscribe good and forbid wrong;
• The institution of hisbah identified right and wrong, based on the
worldview structured on tawhid (complementarity and unitarity),
khilafah (vicegerency) and adalah (justice), whilst Islamic law
provided it with a framework for systematically forbidding wrong
and prescribing good within the market and the society;
• The hisbah suggests a formal relationship in terms of the
established norms of the Shari’ah and also an informal relationship
whereby customs and practices are governed by social
relationships;

• Hisbah produced group performance where individuals, families

and society act in an interactive manner to produce Muslim
morality in everyday practice of businesses;
• Ahilik or moral economy based guild system of Ottomans and the
historical Middle East;
• Linguistically it means ‘brotherhood’, which was the first
vocational education institution as an organisational and
community education institution, which is not confined to
vocational training alone but also included religious, moral,
societal, cultural, and political functions;

• It had played a crucial role in forming today’s business and work

ethics as well as being the pioneering institution for contemporary
institutions such as social security organisations, trade
organisations, workers’ unions and city counselling;
• Hisbah and ahilik institution provided the consequentialist nature
of economic development and the substance of the process, which
produced a ‘social-welfare’ or ‘social good’-oriented
developmentalist paradigm resulting in what can be termed as
IME;
• The concepts of ‘adalah’ (justice) and ‘haqq’ (right) are the core
objectives and operational principles around which the hisbah and
ahilik institutions of Islamic economic system have been
formulated.

THE NATION STATE IN THE MUSLIM JURISDICTIONS:

UNFORTUNATE GREAT TRANSFORMATION
• From the universalism of Islam to the particularism of nation state
and the end of moral economy
• ‘Imagined Community’ (Benedict Anderson)
• New social contract based on citizenship resulting into the
payment of regular tax
• Market system imposed as the reality – the End of History
• Integrated to global capitalism (instances of socialism)
• Modern nation state system was adopted – surplus generator and
transferer
• Mostly westernised Modern Nation States
• Revolutionary and Republican States
• Traditional Kinship States (the GCC)
• Exceptions but they did not contribute to the emergence of an

Islamic Political Economy
• Post-1980s – neo-liberal Muslim states producing Islamic Calvinism
• Within the nation states, the emergence of Islamic Economic
Movement
• Islamic Finance is the new End of History for the Muslim
World for capital accumulation and surplus generation
through the co-optation of Islam to ensure ‘National
Identity’ through fiqh (formalism)
Hence the lost wisdom of moral economy; and the need for the
search for authenticity in the post-modern ties.

EXPLORING EMBEDDEDNESS IN CONSTRUCTING AND FRAMING

ISLAMIC MORAL ECONOMY
Dimension Definition Islamic Moral Economy
Relational Relational embeddedness refers to the quality Based on the concept of ukhuwah (brotherhood) the symmetry of reciprocity
of the relationship and highlights the effects of among similarly arranged or organised groups
cohesive ties between social actors on their
economic actions
Structural Structural embeddedness captures the impact The centricity of redistribution through an allocative centre linked to the
of the structure of relations around social prevailing politico-economic norms of Islam
actors on their economic actions
Positional Positional embeddedness captures the impact The provision for the household based on production for one's own needs in a
of the position social actors occupy in the largely self- sufficient unit such as the family or settlement
overall structure of the network on their
economic actions
Cognitive Cognitive embeddedness refers to the ways in Islamically cognitive embeddedness is expressed through the concept of
which common mental models or a shared tawheed and adalah (the vertical and horizontal equality) which creates the
vision among social actors impact their vision among subjects to act in the manner which increases their Islamic utility
economic actions
Cultural Cultural embeddedness captures the impact of Since Islam has its own ideology, believe system, values and norms through
ideologies of markets, industry cultures and which people perpetuate and develop knowledge about attitudes and life, this
management logics on the actions of the social results in their ideas, perceptions, customs, socio-politico systems and
actors economic constructs being embedded within the Islamic order
Political Political embeddedness refers to the impact of The political embeddedness in Islam is represented through the concept of
power struggles and sanctioning mechanisms khalifah (vicegerent on earth) which represents individual and collective
on the economic actions of the social actors responsibility to implement God’s norms. In order to strengthen the political
embeddedness, different institutions such as hisbah and akhilik were
developed
Source: Adopted and developed from Marx (2004: 65)

COMPARATIVE OVERVIEW OF MARKET, MORAL AND ISLAMIC

ECONOMICS
Main Economic Features Market Economy Moral Economy Islamic Moral Economy
Embeddedness in:
• real economy factors i.e. by essentialising profit and
Embeddedness Disembeddedness Embeddedness loss sharing, risk sharing and assed based products
• non-economic factors i.e. value system; social
formation of Islam; see: axioms.
The role of ethics Ethics free zone; Ethicality is an important factor in defining Ethicality is based on the value system of Islam
Ethics are treated as exogenous human relations
factors
Reciprocity Stoic; people tend to care about Reciprocity; people care about the members Reciprocity; people have a duty through the concept of
his/her oneself before they care of community islah to contribute to welfare of others as they would
about others contribute to their own welfare
Community Non-community; a paradigm based Community; a paradigm based on serving Community, charity and regulated markets; as hisbah
on commerce the community needs is an essential institution of monitoring market
performance in terms of morality and Shari’ah law
Individual’s place Individuality; represents self Collective action of the society (cooperation, Individual actions that one is obliged to perform such
maximisation of material benefit labour sharing, gift exchanging etc.) that as praying, studying, working (fard ayin) but also
and utility every participates in to create moral collective compulsory actions (fard kifaya) such as
outcomes commanding good and forbidding evil, promoting the
welfare of society, establishing justice and so on.
Fictitious commodities Fictitious economic modes of Non-fictitious commodes, where modes of Non-fictitious commodes and decommodification,
production which does not add value production are embedded in real economy modes of production are embedded in real economy
in real economy
Efficiency vs. Equity Efficiency; the employment of Justice; promoting just economic systems Justice system based on principles and values of Islam
efficient financial models in terms of based on fairness and real economy models which can only be achieved through the
profit maximising without implementation of the Islamic Law
considering the consequences

COMPARATIVE OVERVIEW OF AIMS OF MARKET, MORAL AND

ISLAMIC ECONOMICS
Type of Economy
Market Economy Moral Economy Islamic Economy
Human-beings are part of a Human-beings are part of a Human-beings have only one aim
production process production process and is a and it is achieving falah by living
beneficiary of cooperation life in this world according to
Aims of principles and norms of Islam
Islamic The ultimate goal of The goal of production is The aim of production is adl,
Moral production is the creation of creating harmony as an ihsan, tazkiyah and tawhid
Economy in wealth outcome of cooperation
Comparison Created wealth is used for The harmony creates stability, The outcome of the above
with Market consumption or saving for mental peace, love and respect mentioned axioms are falah in
Economy investment and future this world as well as in the world
and Moral consumption to come
Economy Contractual arrangements: Mutual agreement, equal rights, Individual and collective
private rights, institutional mutual trusts and implementing responsibility to implement
trust and market orders justice justice and establish equal rights
to fulfil tawhidi requirements

ISLAMIC ECONOMICS AS A MORAL ECONOMY
As described and explored in the previous lecture and the frame

presented in this session evidences that:
• Islamic economics should be modelled as a moral economy;
• Islamic moral economy constitutes the substance of Islamic
political economy framework;
• Islamic moral economy is an economy that is embedded in or
oriented by moral norms;
• Islamic moral economy represents the critical study of the Islamic
ethical character of economic activities and relationships, and how
this shapes and is shaped by other dimensions of social and
political life determined by normative worldview of Islam;
• Islamic moral economy is the application of Islamic ethical categories to

the study of the economy and finance;
• Islamic moral economy considers economy as embedded in Islamic social
formation expressed within Islamic social context;
• Islamic moral economy suggests a particular ‘modes of production’ based
of risk sharing and participation.

Further moral economy features of Islamic moral economy, are as

follows:
• Embeddedness in real economy;
• Embeddedness in non-economic factors;
• Decommodification and rejecting fictitious commodities;
• Values of Islam in shaping the normativeness;
• Reciprocity;
• Community and charity;
• Convention and coordination;
• Takaful or mutuality;
• Collective action: cooperation including labour sharing.

In concluding:
• Islamic moral economy, hence, is another part of Polanyian double

movement/counter movement to re-embedding the economy to ensure
the dignity of labour and fair distribution of resources.
• Importantly, these features indicate a particular social formation shaped

by the normative nature of Islam.

MORAL ECONOMY OF MARKET BOUNDARIES

Ethical boundaries of markets
• Human body
– Kidneys
– Sexual and reproductive services
• Environmental goods
• Ecosystem services and biodiversity
• Carbon trading
• Intellectual property and knowledge commons
• Education
• Health services
• Livelihood conflicts on the frontiers of commodification, etc.

FINANCIALISED ECONOMY AS DISEMBEDDEDNESS
Source: Nagaoka (2009)

The linear economy nature:

Moral Economy: G-M-G
Financialised Economy: M-C-M
G: Goods
M: Money
C: Commodity

Financialisation contd.
• The notion of financialization has not been used by mainstream economists as a
specific phenomenon that has detrimental effects on the functioning of economy
and society in a broader sense. Instead, they have reflected with positive view
upon the remarkable ascent of finance within economic system.
• Accordingly, it is believed that the proliferation of financial markets would hasten
financial development and hence foster economic growth (see, for instance,
Levine 1998; Ang 2009; Beck et.al. 2014; Cheng et.al. 2014 amongst others).
• Since the declining rates of growth in the 1970s put most economies into trouble,
mainstream economists prescribed financial development as the central objective
for regeneration of economic boom.
• Thus, debates have been pursued within such a narrow perspective that confines
financialization to a particular attempt for regaining economic prosperity without
taking its social, political and other implications into consideration.

• The debates, in particular, seek any causal relationship between financial

development and economic growth through plenty of empirical studies repeating
similar findings in the literature.
• In line with this, determining robust indicators for financial development and
economic growth (Estrada et al. 2010; Wu et al. 2010; Hassan et al. 2011; Hachicha
and Amar 2015), the role of bank-based or market-based financial systems on
economic performance (Levine 2002; Chakraborty and Ray 2006; Uzunkaya
2012), the direction of causality (Luintel and Khan 1999; Christopoulos and
Tsionas 2004; Hsueh et al. 2013; Gould et al. 2016) and the impact of financial
repression or liberalization (Roubini and Sala-i-Martin 1992; Demetriades and
Luintel 2001; Rousseau and Wachtel 2011) have constituted the primary concern
associated with the rise of finance.
• While the role finance has been essentialized in the side of mainstream literature,
the break out of global financial crisis starting in 2007 disenchanted most
economists with regards to their trust in finance-led growth regime.

• However, a systemic challenge of prevailing neoliberal form of financialization has

never been debated in the mainstream literature.
• Financialization, either calling it subordinate, peripheral or hegemonic, is
expansive across the globe. Its hegemonic power manifests:
the increasing dominance of the finance industry in the sum total of
economic activity, of financial controllers in the management of
corporations, of financial assets among total assets, of marketed securities,
and particularly of equities, among financial assets, of the stock market as a
market for corporate control in determining corporate strategies, and of
fluctuations in the stock market as a determinant of business cycles. (Dore
2002:116-17)
• This is also evident in some statistical records. Baker et al. (1998: 10), for instance,
show that the share of funds raised on global financial markets in the overall world
exports was 0.5 per cent in 1950, whilst it rose to 20 per cent in 1996.
• Likewise, the ratio of global financial assets to global GDP rose at least three
times (Blankenberg and Palma 2009) in the last three decades.
• Considering also the growth of debt markets from US$33tn to US$90tn and stock
market from US$49tn to US$66tn between 2000 and 2013 (Ro 2014), the control
of US corporate equities by money managers (Porter, 1992), the rise of the
percentage of pension funds in total business equities (Ghilarducci, 1992), it can be
claimed that the bulk of the world economic activities are maintained by large-
scale expansion and proliferation of financial market operations in the 21th
century, which brings finance at the core of economy and changes the entire
social formation of contemporary societies.

FINANCIALISATION, DEMATERIALITY AND DIS-EMBEDDEDNESS

(Eric Fimbel, Anne-Sophie Binninger, Catherine Karyotis, (2015) “Demateriality: A key factor in the embedding of society within
commodification and financialization”, Society and Business Review, 10(1), pp.76-90)
• The altering effect of finance on existing relationships within the

society is addressed by Fimbel et.al. (2015: 76) through
essentializing the notion of ‘demateriality’, which he defines “as a
substratum creating new conditions for relationships within the
social fabric”.
• In this regard, while initially currency, credit and securities were
dematerialized; subsequently, traditional relationships based mainly
on proximity and loyalty had been broken up for the sake of forming
new economic relationships between producers, consumers and
suppliers.

• Consequently, not only society has been embedded within the

economy; but economy has also been embedded within finance,
which together signify ‘double embedding’ (Fimbel et.al., 2015: 78).
• The process of double embedding, however, is identified, in
Fimbel et al.’s (2015) understanding with ‘marketization’ that
establishes structuring role of demateriality. Since the process of
embeddedness is signified by economy and finance, this constitutes
dis-embeddedness in Polanyian discourse, which is an important
consequence of financialization within political economy context.”

CONSTITUTIVE INCOMMENSURABILITY
From a person in the Narmada Valley in western India on being displaced as a
result of the Sardar Sarovar Dam, to the Chief Minister of the state
government.
‘You tell us to take compensation. What is the state compensating us
for? For our land, for our fields, for the trees along our fields. But we
don’t live only by this. Are you going to compensate us for our forest?…
Or are you going to compensate us for our great river – for her fish, her
water, for vegetables that grow along her banks, for the joy of living
beside her? What is the price of this? … How are you compensating us
for fields either – we didn’t buy this land; our forefathers cleared it and
settled here. What price this land? Our gods, the support of those who
are our kin – what price do you have for these? Our adivasi (tribal) life –
what price do you put on it?’
From: Brava Mahalia (1994) ‘Letter from a Tribal Village’, Lokayan Bulletin, 11.2/3, Sept-Dec.)

NOTES ON MORAL ECONOMY UNDERSTANDING
Moral Economy Understanding: Oscar Wilde

In referring to the morality of market, try to make sense of Oscar
Wilde:
“They know the price of everything and the value of nothing”.
Moral Economy Articulation of Bourdieu (2005: 197)

“It is not the prices that determine everything, but everything that
determines prices”

Destruction of Buffalos: The Role of Withering Moral Economy in

Understanding the Extinction of Red Indians

Moral Economy Understanding of Arnold Toynbee

(Related by Nuri Arlases in an interview conducted by Beşir Ayvazoğlu, in Turkish)
'Do Not Miss Our Joy with This Bad Money'
Together (with Arnold Toynbee) we went one day to a village in the south, 70-80 kilometers from Antalya. We saw a
coffee and entered. A bright-faced old man. It came to my heart, I went very sincerely and kissed his hand: "Daddy," I
said: "We are very hungry, can you take care of it?" “Son,” said the old man; “As long as you put up with the poor!
Whatever we have is yours. Only my Lord creates out of nothing. Don't expect that from us!”. I translated, Toynbee was
surprised; “A true philosopher, a man in love with wisdom!” said. The old man brought very good food. Despite all our
insistence, he did not accept money; “From where you have come to this place where the birds do not fly, caravan does
not pass, you have given our hearts relief. Will you also give money? What money?" said. But I insisted. Then he said:
“Look son, you are our guest; If you insist any longer, we will have to accept your money. If your bad money worth to miss
our joy, then give it'!"
I could no longer insist. I translated exactly what he said to Toynbee. The great Englishman had tears in his eyes and said:
“Please translate exactly what I have to say. He gave us an eternal lesson in humanity in the strongest sense of the word.
We will never be able to pay this debt. It is such heroes who keep the worlds alive, hidden in every country. For the sake of
their existence, countries will remain standing. These are called "salt of the earth" in the Bible. We made big mistakes
while industrializing. We lost all these values at the expense of material wealth. You face the same danger, learn from us.
We will always remember you with gratitude and gratitude in life”.

Moral Economy in Adam Smith

“He certainly is not a good citizen who does not wish to promote, by
every means in his power, the welfare of the whole society of his
fellow citizens.
It does not follow that a regard to the welfare of society should be the
sole virtuous motive of action, but only that, in any competition, it
ought to cast the balance against all other motives.”
Adam Smith, The Theory of Moral Sentiments, 1759.

Moral Economy Understanding: K. Marx

“With the development of interest-bearing capital and the credit
system, all capital seems to be duplicated, and at some points
triplicated by the various ways in which the same capital, or even the
same claim, appears in various hands in different guises. The greater
part of this ‘money capital’ is purely fictitious… In the way that even an
accumulation of debts can appear as an accumulation of capital, we
see the distortions involved in the credit system reach its culmination”.
Marx, Das Kapital, Vol. 3. 29-30 (trans. D. Fernbach)
Moral Economy Understanding: Arnold
“[E]conomic systems are social institutions, and social institutions are
... domains of human behaviour that answer to some identifiable
range of human needs.” (Arnold, 1994: 4).

Moral Economy Understanding of Wallerstein:

“I believe that, in all major historical systems ('civilizations'), there have always been
a certain degree of commodification and hence of commercialization. As a
consequence, there have always been persons who sought profits in the market. But
there is a world of difference between a historical system in which there exist some
entrepreneurs or merchants or 'capitalists' and one in which the capitalist ethos and
practice is dominant. Prior to the modem world system, what happened in each of
these other historical systems is that whenever capitalist strata got too wealthy or
too successful or too intrusive on existing institutions, other institutional groups
(cultural, religious, military, political) attacked them, utilizing both their substantial
power and their value-systems to assert the need to restrain and contain the profit-
oriented strata. As a result, these strata were frustrated in their attempts to impose
their practices on the historical system as a priority. They were often crudely and
rudely stripped of accumulated capital, and in any case made to give obeisance to
values and practices that inhibited them. This is what I mean by the anti-toxins that
contained the vims.”

Moral Economy Understanding: Keynes

“Capitalism is absolutely irreligious, without internal union, without
much public spirit, often, though not always, a mere congener of
possessors and pursuers.”
John Maynard Keynes (1963) Essays in Persuasion. New York: Norton, pp. 306-307.

Moral Economy Understanding: Pope Francis

The Encyclical released by Pope Francis titled as Laudato Si’ or On Care
for Our Common Home (2015) provides a moral and structural response
to the economic, social and environmental crisis and challenges; as he
states that:
“Ecological culture cannot be reduced to a series of urgent and partial
responses to the immediate problems of pollution, environmental
decay and the depletion of natural resources. There needs to be a
distinctive way of looking at things, a way of thinking, policies, an
educational program, a lifestyle and a spirituality which together
generate resistance to the assault of the technocratic paradigm”.
Pope Francis, Laudato Si’ (Our Common Future) (2015:111)

Moral Economy Understanding: Rowan Williams (former

Archbishop of the Church of England)
“Economics is in urgent need of being rescued from its captivity to virtual reality – a
world in which measurable practical value and demonstrable human benefit seem to
have vanished over the horizon and been replaced by a sophisticated board game
(with rather high human collateral damage). We still lack a credible vision, let alone
a programme of action, to deal with the moral implications of sluggish growth and
shrinking employment; we still fail to see shareholder value in the context of the
well-being of stakeholders in the whole economic enterprise. Here is a timely
reminder that this situation can be challenged and changed if we are ready to
challenge some of the foundations of classical economics and to understand value or
prosperity in terms of the human well-being that is promoted by participatory or co-
operative business practice.” (Rowan Williams, Master of Magdalene College,
Cambridge, UK)
From: M. Griffiths & J. R. Lucas (2016) Value Economics: The Ethical Implications of
Value for New Economic Thinking. London: Palgrave.

Moral Economy Understanding: Capital as Power by Jonathan

Nitzan
“The framework of ‘capital as power’ offers a radical alternative to
both liberal and Marxist political economies. In this framework, capital
is viewed not as a productive economic entity, but as the central power
institution of capitalist society at large, while capitalism as a whole is
seen not as mode of production and consumption, but as a mode of
power”.

Moral Economy Understanding: Schiller

“Finance is not about ‘making money’ per se. It is a ‘functional’ science
in that it exists to support other goals – those of the society. The
better aligned a society’s financial institutions are with its goals and
ideals, the stronger and more successful the society will be.” (Shiller,
2012: 7)
Finance “is not, and should not be, merely a zero-sum game, but
rather an adjunct to, and a means toward, a productive life.” (Shiller,
2012: 104)
Shiller, Robert (2012). Finance and the Good Society. Princeton University Press.

Moral Economy Understanding: Ibn Qayyim on Riba and fictitious

riba-free state:
“It is impossible for the Law of the Wisest of the wise [God] that He
would forbid a harmful dealing [riba, or usury], curse its perpetrators
and warn them of a war from God and his Messenger, and then to
allow a ruse to result in the same effect with the same harm and added
transaction costs in constructing the ruse to deceive God and his
Messenger. This cannot be in accordance with the law, because riba on
the ground is more facile and less harmful than riba with a tall ladder
atop of which the two parties conduct the riba…”

Moral Economy Understanding: Shariati

Behdad (1994: 782) observes that: “Shariati regards property as a
source and a manifestation of oppression… Shariati views total
destruction of property relations as the necessary condition for human
liberation”.
Behdad, Sohrab (1994) A Disputed Utopia: Islamic Economics in Revolutionary Iran.

Comparative Studies in Society and History, Vol. 36, No. 4., pp. 775-813.

Moral Economy Understanding: Taleqani

“The term jihad is always attached to the locution fi sabil Allah (in the way of
Allah). What is the way of Allah? Which direction is it? Is it toward the
heavens, toward Mecca, or toward Jerusalem? No. The way of Allah is the
very path of the well-being and betterment of human society. It is the way of
justice, truth and liberty. It is the building of a world in which a specific group
or class does not dominate over the destiny of the people, in order to stop
people from utilizing the natural resources that Allah Almighty has created
for the common use of humanity. As Allah has given natural powers and
intellectual capacities to man, as Allah has created this atmosphere, light,
and land for everybody. Sabil Allah refers to the world in which all the people
can develop their human capacities in order to obtain freedom”.
Taleqani, Ayatullah Mahmud (1986). “Jihad and Shahadat”, in Mehdi Abedi & Gary
Legenhausen (eds.), Jihad and Shahadat: Struggle and Martyrdom in Islam. North Haledon &
New Jersey: Islamic Publications International.

Moral Economy Understanding: Iqbal
A blaze of art and science lights the West

With darkness that no Fountain of Life dispels;
In high-reared grace, in glory in grandeur,
The towering buildings of banks out-top the cathedral roof;
What they call commerce is a game of dice,
For one, profit, for millions swooping death.
There science, philosophy, scholarship, government,
Preach man’s equality and drink men’s blood.
From:
Lenin in the Presence of God
By Allamah Muhammad Iqbal

Moral Economy as articulated by Titus Burckhardt (1992) Fez: City of Islam

“I knew a comb-maker who worked in the street of his guild, the mshshātin. He was called ‘Abd al-Azīz (the ‘slave of the
Almighty’) and always wore a black jellaba – the loose, hooded garment with sleeves – and a white turban with a lithām, the
face veil, which surrounded his somewhat severe features. He obtained the horn for his combs from ox skulls, which he
bought from butchers. He dried the horned skulls at a rented place, removed the horns, opened them lengthwise, and
straightened them over a fire, a procedure that had to be done with the greatest care, lest they should break. From this raw
material he cut combs and turned boxes for antimony (used as an eye decoration) on a simple lathe; this he did by
manipulating, with his left hand, a bow which, wrapped round a spindle, caused the apparatus to rotate. In his right hand he
held the knife, and with his foot he pushed against the counterweight. As he worked he would sing Qur’ānic sūrahs in a
humming tone.
I learned that, as a result of an eye disease which is common in Africa, he was already half blind, and that, in view of long
practice, he was able to ‘feel’ his work, rather than see it. One day he complained to me that the importation of plastic combs
was diminishing his business: ‘It is not only a pity that to-day, solely on account of price, poor quality combs from a factory are
being preferred to much more durable horn combs,’ he said; ‘it is also senseless that people should stand by a machine and
mindlessly repeat the same movement, while an old craft like mine falls into oblivion. My work may seem crude to you; but it
harbours a subtle meaning which cannot be explained in words. I myself acquired it only after many long years, and even if I
wanted to, I could not automatically pass it on to my son, if he himself did not wish to acquire it – and I think he would rather
take up another occupation. This craft can be traced back from apprentice to master until one reaches our Lord Seth, the son
of Adam. It was he who first taught it to men, and what a Prophet brings – for Seth was a Prophet – must clearly have a special
purpose, both outwardly and inwardly. I gradually came to understand that there is nothing fortuitous about this craft, that
each movement and each procedure is the bearer of an element of wisdom. But not everyone can understand this. But even if
one does not know this, it is still stupid and reprehensible to rob men of the inheritance of Prophets, and to put them in front
of a machine where, day in and day out, they must perform a meaningless task.” (Burckhardt, 1992: 124-125)
Titus Burckhardt (1992) Fez: City of Islam, trans. William Stoddard. Cambridge: Islamic Text Society. pp. 124-125.

IN CONCLUDING:
• The notion of the moral economy rests with a central principle:
embeddedness.
• Premodern economies are moral because they are an integral part of
social relations and noneconomic institutions.
• Of course, how economic and social relations work together will
differ depending on various contexts but the common thread running
through an understanding of a premodern moral economy is that
aims, objectives and processes are informed and directed by the
noneconomic (Polanyi, 1957; 1960; 1968; Scott, 1976).
Thank you.
M. Asutay

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Sakarya University

Faculty of Economics and Business Administration

MSc in Islamic Economics and Finance

DEFININING MORAL ECONOMY

• Thus, ‘moral economy’ can be defined as a collective action that

Mehmet Asutay 2 Autumn Term 2021

• Since in a market economy all is subjected to “the law of the market”,

Mehmet Asutay 3 Autumn Term 2021

INTERDISCIPLINARY PERSPECTIVES ON MORAL ECONOMY

(i) Philosophy: some analytical distinctions;

(ii) Political philosophy and political economy: what is the

Mehmet Asutay 4 Autumn Term 2021

SENSES OF ‘MORAL ECONOMY’

• An approach to the study of an object

Mehmet Asutay 5 Autumn Term 2021

MORAL ECONOMY: AN APPROACH TO THE STUDY OF AN OBJECT

(i) Moral economy is the application of ethical categories to the study of

– ‘When economists spoke “qua economist” …they tried to speak in a

Mehmet Asutay 6 Autumn Term 2021

– ‘The fact-value dichotomy …. penetrated neo-classical economics

– Economics needs to rediscover the ethically ‘rich descriptions’ that

(ii) Moral economy is the application of economic categories to the

Mehmet Asutay 7 Autumn Term 2021

MORAL ECONOMY: A DISCIPLINE DEFINED BY AN OBJECT OF

• Moral economy is the study of the ethical character of

Mehmet Asutay 8 Autumn Term 2021

MORAL ECONOMY: A PARTICULAR KIND OF ECONOMY

• Moral economy comprises a particular set of relationships,

Mehmet Asutay 9 Autumn Term 2021

THE FEATURES OF MORAL ECONOMY

Mehmet Asutay 10 Autumn Term 2021

Contextualising Moral Economy:

The moral economy of the English crowd - E. P. Thompson

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Contextualising Moral Economy:

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POLANYI AND THE GREAT TRANSFORMATION (1944)

• The embedded economy nature existed since primitive-archaic

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• Polanyi’s thesis that the market economy is a disembedded

Mehmet Asutay 14 Autumn Term 2021

• Therefore, the struggle of re-embedding economy in society and

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• Polanyian discourse is essential for us to understand the

• Polanyian approach - such a traditional social formation and

Mehmet Asutay 16 Autumn Term 2021

POLANYI AND THE GREAT TRANSFORMATION (TGT) (1944):

§ TGT argues that the neoliberal market economy system separated

Mehmet Asutay 17 Autumn Term 2021

§ Clark (2008) highlights

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§ Polanyi conceptualised the emergence of liberal economy principle

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§ Accordingly (Polanyi-Levitt 2013):

Mehmet Asutay 20 Autumn Term 2021

§ This new liberal economic system is guaranteed by the modern

Mehmet Asutay 21 Autumn Term 2021

§ The self-regulating market economy is

Mehmet Asutay 22 Autumn Term 2021

Mehmet Asutay 23 Autumn Term 2021

§ In the market economy, they became a commodity which will be

Mehmet Asutay 24 Autumn Term 2021

§ That composed Polanyi’s most appraisement concept, the double