CHAPTER 2: WORLD-VIEWS, VALUES AND ACCOUNTING; DIFFERENT “ACCOUNTINGS” FOR DIFFERENT WORLDVIEWS.
2.0 OUTLINE OF CHAPTER
In this chapter, the “Western” worldview, values and norms that underlie conventional Anglo–American Accounting are discussed. The Islamic worldview and values are then presented and contrasted with the “Western” worldview and are shown to be different. These differences are shown to lead to different economic objectives, norms and socioeconomic behaviour. Finally, the implications for accounting systems arising from these different socioeconomic norms are presented. The researcher suggests that, extending Roslender’s (1992) concept of Accountancy as a social institution and not merely a technical subject devoid of religious and philosophical values, conventional accounting is based on a European psyche quite different from Islamic worldview and philosophy. Conventional accounting has certain implicit values and norms of its own society and this is reflected in the way it was developed and expanded. Further, in its present conformation, it is devoid of those values, which we can term spiritual/religious and thus may not be appropriate for an Islamic society. There is therefore a need for an alternative ‘Islamic accounting’ consistent with their world-view and objectives. The succeeding chapters examine this need in detail.
2.1 WORLDVIEWS,VALUES AND THEIR IMPACT ON ECONOMIC OBJECTIVES,NORMS AND ACCOUNTING
A worldview (weltanschauung) can be thought of as the set of implicit or explicit assumptions about the origin of the universe and the nature and purpose of human life (Chapra, 1992). In the words of Lovejoy (1960)1, it controls the “nature of man’s reflections on almost any subject” (p 6). Differences in world-view can lead to differences in economic values and norms which in turn affects accounting.
As quoted by Chapra (1992).
According to Haralambos & Holborn (1995), values are beliefs that “something is good and desirable” (p5). Values define what is important and consequently what is worth striving for. Norms, on the other hand, are the guidelines that guide conduct in particular situations. Norms are said to define “what is acceptable and appropriate behaviour in particular circumstances” (ibid., p5). We can thus see that the three terms namely the worldview, values and norms constitute the thought/ behaviour interface. Worldview is at the most general level, values at a more detailed level and finally norms at a very detailed, specific level. Every society has a shared worldview, norms and values, which give it its distinctiveness and cultural identity and delineate it from other societies and cultures. The group, which shares this cultural identity, could be of national, regional, ethnic or linguistic origins. However, when similar norms and values transcend geographical, linguistic and even ethnic boundaries, the society tend to become a civilisation, even if these linguistic, ethnic and geographical traditions remain intact among the group sharing this ‘civilisational’ identity. The researcher differentiates two civilisations here, the Western (Anglo-American/Western European) and Islamic civilisations (Hunttington, 1996; Economist, 1998). The differences in the worldviews, values and norms between the two civilisations are in part due to their sources. The West takes its values from philosophical thought although it cannot be denied that Western values have been influenced by Judeo-Christian religion (Russell, 1995). Despite this, however, 20th Century Westerners seem to be moving away from religion (Ashford & Timms, 1992). On the other hand, Islamic civilisation sources its values from its religious scriptures, the Qur’an and Hadith, although Muslim society has not been immune to Western philosophical developments and influence.
Chapter 2 2.1.1 The Western Worldview and values
A caveat is in order before discussing the Western world values. The researcher recognises that like other societies, Western society is not monolithic and homogenous but reflects a continuum of values. For example, individualism and consumer culture prevails in most parts of the USA, a more communitarian approach is recognised in, for example, the Rhine model of capitalism in Germany and other parts of continental Europe, where maximisation of profits and shareholder wealth is not the main objective. The former Warsaw pact countries were at least until recently more socialistic in approach. The study by Ashford & Timms (1992), for example, indicates wide disparities among respondents in Western European countries surveyed regarding attitudes to religion, politics and other social matters. Despite this fact, however, certain fundamental beliefs such as democracy, materialism, secularism and utilitarianism still pervade Western values and thought and can be considered root metaphors of being ‘Western’. Haralambos & Holborn (1995), for example, note that materialism and individual achievement have been suggested as major values in Western industrial society. The notions of democracy, liberalism and secularism are some of the values, wh\ich underlie Western society and in turn affect economic behaviour and accounting. Other values include individualism, consumerism and empiricism. Certain newer values such as environmentalism, pluralism and gender equality are becoming more mainstream, but cannot be as yet considered core values and therefore will not be discussed.
2.1.2 Western Worldview
The researcher considers the Western Worldview as a basically materialist worldview, in the sense that it is mostly sceptical towards the concept of life after death. Even when there is a belief in God or a spiritual being, it does not seem to influence economic or political behaviour to any great extent. Thus, religion to the Occident:
“.....means a way of spending an hour or so on Sundays in practices which give him some support and strength in dealing with the problems of daily life, and which encourages him to be friendly towards other persons and to maintain the standards of sexual propriety2; it has nothing to do with commerce or economics or politics or industrial relationships....or may even look upon religion as an opiate developed by exploiters of the common people in order to keep them in subjection”. (Watt, 1979, p3 as quoted in Haneef, 1997)
A more atheistic materialist Western view (e.g. Marxist) would hold that “matter is the primordial or fundamental constituent of the Universe, which is not governed by intelligence, purpose or final causes” (Chapra, 1992, p22). The consequence of this worldview is that material wealth and sensuous pleasures become the greatest values one could seek or attain. This in turn becomes the basis for the increasing commercial consumer culture in economics and shareholder wealth maximisation concepts in accounting.
2.1.3 Democracy and Popular Sovereignty
According to Held (1996) democracy means “‘a form of government in which, in contradistinction to monarchies and aristocracies, the people rule” (p1). The word is derived from the root Greek works demos (people) and kratos (rule). Democracy is said to have developed in the classical model in Athens around 500 BC. Although the ideals of freedom, equality, respect for Law and Justice were developed by Greek Philosophers, democracy developed into the modern form through the social contract theories of Hobbes, Locke and Rousseau and ended up in the modern liberal form through the writings of John Stuart Mill. (McClelland, 1996) John Locke’s (1632-1704) work is perhaps the most important for understanding the construction of the modern liberal economic state. His political philosophy was based on the laws of Nature which reason and experience suggest will provide the best practical policy for governing human communities. While Hobbes had justified strong leadership as necessary to control the natural wild solitary and competitive state of man, Locke argued
According to Ashford and Timms (1992), the percentage of people wishing complete sexual freedom in Western Europe has increased from 25% to 35% from 1981 to 1990, while only 41% believed that the Church should have a say in extra-marital affairs. Only 22% wanted the Church to have a say in Government Policy.
that man had a natural tendency to form contracts (which eventually took the form of moral laws) with his fellows for survival. He thus advocated that government was only legitimated by a social contract - a constitutional government with a separation of powers, between legislature, the executive and the judiciary. Although Held (1996) describes the various types of democracies, these will not be discussed here, as the importance of the democratic values in this research is not in the political sphere but the concept of popular sovereignty implicit in democracy (Hirst, 2000). The concept of popular sovereignty holds that the people are the ultimate legislator or source of ultimate authority. Since most Western states are democracies, the sole legislative prerogative of the “Western” people implies that people are the source of all morality, norms and values which find their way through the legislature into the regulation of economic and social sectors of the community. This can be compared to other systems in which sovereignty belonged to the King (e.g. in 16th Century France) or a God-King (in China or Japan) or God Himself (as in Islam). Since values in modern states tend to be prescribed or proscribed into Law, the concept of popular sovereignty in a democratic setup has major implications for economic norms, regulations and laws, which in turn have direct implications for accounting.
2.1.4 Individualism, liberalism and utilitarianism
The appeal to a naturalistic conception of justice and law in the social contract developed into liberalism and individualism. According to Macpherson (1962), the roots of the liberal democracy is to be found in the liberal new belief in the primary moral value and the rights of the individual i.e. individualism of the 17th Century. Thus:
“Whether the individualism of the 17th Century is deplored as undermining the Christian natural law tradition, or applauded as having opened new vistas of freedom and progress, its importance is not disputed. Nor is doubted that individualism has been an outstanding characteristic of the whole subsequent liberal tradition. Individualism as a basic theoretical position , starts at least as far back as Hobbes.” (Macpherson, 1962, p1)
Individualism was partly influenced by Kant (1724-1804) who considered that individual human beings are ends in themselves. Persons are owed respect for their autonomy, which
is protected by inviolable rights. Individualism also presents itself in the guise of the importance of individual achievement, such as coming out top of the class. According to Haralambos & Holborn (1995), this individual achievement is often measured and symbolised by the quality and quantity of material possessions. This can also be seen as the basis for the rat race and cutthroat economic competition. This individualism later gave rise to liberalism. The liberal tradition is that there are “radical and irresolvable differences over what the good for the human beings is and what their ultimate nature is thought to be” (Plant, 1991, p 74). Hence, there are no foundations to guide the West on the ultimate nature of good and bad. Therefore a communitarian conception of politics i.e. a state or society built on the basic virtues is impossible. Thus Ackerman (1980) (as quoted by Plant, 1991) argues that:
“Liberalism does not depend on the truth of any single metaphysical or epistemological system....In order to accept liberalism, you need not take a position on a host of Big Questions of a highly controversial character”. (Ackerman, 1980, p361)
Hence, in the liberal democracy, the community agrees to disagree on basic values, which leads to moral pluralism i.e. that there are many equally worthwhile values and ways of life, which are incompatible with each other. Another form of individualism is influenced by classical utilitarianism put forward by Jeremy Bentham (1748-1832) which prizes the human capacity for pain and pleasure. According to Bentham, man in his political and economic relationships was and should be treated as a calculator of his own interest, and that this calculus exhausted his nature. “The utilitarian is at bottom only a restatement of the individualistic principles which were worked out in the 17th Century” (Macpherson, 1962 p2). According to Honderich (1995), “Utilitarianism is a moral philosophy which treats pleasure or desire satisfaction as the sole element in human good” and the “morality of actions entirely depends on consequences or results for human well-being. It discards religious traditions and social conventions in treating human well being or happiness as the touchstone for all
moral evaluation. In its earliest form, utilitarianism is a hedonistic doctrine i.e. treating pleasure and pain as the sole good things in human life” (p 890). Benthamite utilitarianism led to excesses in individualism as it expounded a narrowly selfish and narrowly rationalistic doctrine. John Stuart Mill attacked it as a perversion of the
fundamental liberal insights of an earlier tradition. The suggested solution was to bring back a sense of moral worth of the individual and combine it again with a sense of the moral value of the community. The many attempts to ‘repair’ individualism such as that of idealism and pluralism ran into serious difficulty according to Macpherson (1962). He propounds the theory of ‘Possessive individualism’, which he states is the underlying unity of English political thought and the persistent and deep rooted assumption of liberal democratic thought. This ‘possessive quality’ was the concept of the individual as essentially the proprietor of his own person or capacities, owing nothing to society for them. The individual is neither a moral whole nor a part of a social whole, but as an owner of himself. Freedom from dependence on the will of others is a function of possession. Society consists of relations of exchange, which are undertaken voluntarily between proprietors with a view to their own interest. “Political society is a human contrivance for protection of the individual’s property in his person and goods and for the maintenance of an orderly relations of exchange between individuals regarded as the proprietors of themselves i.e. a series of market relations” (Macpherson, 1962, p264). This view it seems to the researcher restricts the role of government to
facilitating economic activity so that people can accumulate material wealth instead of promoting equitable distribution of wealth or spiritual values.
Chapter 2 2.1.5 Empiricism
Empiricism is a philosophy of knowledge, which claims that the body i.e. the senses, is what brings us in touch with the world of external reality. Thus, knowledge is only attainable by perception of the senses through scientific observation and experiments. Reason alone or Revelation cannot be a source of knowledge. Lock’s philosophy became the first comprehensive exposition of empiricism, which was itself a spin-off of earlier scepticism and later elaborated by Berkeley (1685 -1753) and Hume (1711-1776). Hence, the study of cause and effect relationships in natural phenomena was henceforth to occupy pride of place in research and knowledge acquisition. However, the empiricists went overboard on extending this to social sciences and ethics, where complex human interrelationships require critical or interpretative enquiry, which require value-based interpretations. The realist ontology of empiricism also led to a realist construction of ethics. For example, Hume believed that morality was a wholly human construction governed by human nature and not by a higher authority (Russell, 1995). However, Hume’s distinction between ideas and impressions (perception of patterns in our experience), and his admission that it is uncertain whether impressions arose immediately from the object or perceived by the creative power of the mind, led to more uncertainty and a feeling of more unreality. This is the exact opposite of what science is supposed to achieve; certainty and fact rather than belief and superstitions. The extension of empiricism to ethics in the contemporary postmodern scene, marked by an ‘incredulity towards metanarratives’ (Lyotard, 1990) has led to ethical relativism and moral pluralism. Empiricism became the foundation of modern social science, which together with utilitarianism drives much mainstream positive accounting research and practice. It is also the reason for a preference to a positive economic and accounting theory (Watts & Zimmerman, 1980) rather than normative, value based ones.
Chapter 2 2.1.6 Secularism
Scientific discoveries during the renaissance, such as the heliocentric theory by Copernicus, went against the beliefs of the Roman Catholic Church, which by that time was deeply involved in politics. These discoveries were considered heretical and the Church started to persecute the scientists using the Inquisition, for example, Galileo (1564-1642) who had publicised Copernicus’s work. However, according to Russell (1995), “The Inquisition was successful in putting an end to science in Italy but it did not prevent men of science from adopting the heliocentric theory, and did considerable damage to the Church by its stupidity” (p 520). This tussle between science and religion (represented by the teachings of the Church) led to the eventual cessation of religious control (and even influence in) of politics and society in the West. The secularisation and separation of politics from religion and morality began with the writings of Niccolo Machiavelli (1469-1527), who had studied the mechanics of political power as a subject beyond, if not exclusive of, moral doctrine. He put forward a new kind of political theory basing it upon experience of history rather than any moral or abstract principles. Governing could henceforth be justified by the end, notwithstanding the means used to achieve it. Thus, Machiavelli was clearly an early modern liberal’ who liberated the ruler from responsibility to God and ethics. Francis Bacon (1561-1626) championed the inexorable rush towards the values of scientific reason and weakening the dominance of theology and authority of scholasticism. According to him, It is only through reason that men can hope to understand and control the laws of nature, knowledge was power, and theology should be separated from philosophy. Practical affairs rather than moral speculation should drive the latter. Secularisation was perhaps a thrust to the decay of Christian doctrine in the European mind and led to the separation of Science and Religion. The latter came to be seen as an inhibition to reason, experimentation and free enquiry and a force for indoctrinating false beliefs. Thus:
“The power of the Church was gradually corralled into the religious sphere; the influence of religion increasingly limited to the realm of private conscience. As a result, the speculation of the theologians, scientists and philosophers, the work of artists and writers, and the policies of the princes were freed from the control of a Church with monopoly powers and ‘totalitarian’ pretensions”. (Davies, 1997, p471)
The prime quality of the Renaissance was ‘independence of mind’ which meant that a person no longer needed God or religion to guide or authorise him to believe, know or taste in certain ways. Humanity was now capable of mastering the world. In the first phase the Church and its authority (and tradition) was dethroned but God still sat on His throne but became less active in man’s affairs. Man gained self-confidence and could now use Godgiven ingenuity to unravel the secrets of God’s universe; man’s fate could now be controlled and improved. Secularism also gave birth to biblical criticism as a scholarship and eventually led to scepticism of religion as a whole (not only Christianity and the Church) which meant the loosening of the bond between religious based beliefs and individual, economic and social action. Secularism had a profound effect on Western thought and on economic behaviour, as these were now freed from moral constraints of religion and economic behaviour was only restricted by man-made laws.
2.2 CAPITALISM, ECONOMIC NORMS AND ACCOUNTING
Capitalism, along with double entry, the essence of modern accounting, is said to have started in 13th Century Italy (Yamey, 1982). During that time, several rich city-states developed in Italy, i.e. Venice, Florence and Genoa as a result of the interchange of trade and culture between Europe and the Islamic /Byzantine empires. The trade became enormous, the cities importing the luxurious silk, spices etc. from the East and exporting handicrafts to the East. Commercial capitalism arose in Italy on a vast scale. Although usury was prohibited and scorned at by Christian Law, the city-states and the Papacy, due to commercial expediency, tolerated it. The inconsistency was argued away as ‘profit’ from loans because it was for productive purposes and not for consumption expenditure (Tawney, 1927). This led to the expansion of banking and trading houses and the banking
system, which eventually spread to other parts of Europe in which agencies of these bankers were established. When trade expanded with colonialism, conquests and scientific discoveries, new trading centres emerged in other parts of Europe in Antwerp, London, Paris and Rotterdam and lastly in Germany. The increasing trade and especially the later industrial revolution
resulted in the establishment of joint-stock companies, firstly as Chartered monopolies and later as publicly traded companies on a stock exchange. Whereas the large traders of the Renaissance age were European family companies, the new industries were owned in theory at least by many people but in reality controlled by a few. Adam Smith (1723-90) who published The Wealth of Nations laid down the theoretical foundations of modern economic theory and capitalism. In this work he propounded the theory of the invisible hand of the market i.e. that self-interest and a free market ensures the good of the society. In his, Theory of Moral Sentiments, born out of rationality and
empiricism of his age, Smith argued that people are naturally inclined to selfishness and that social co-operation was an insufficient guarantee for social harmony. He opined that the latter could only be achieved by ensuring that the interests to which men dedicated themselves, often selfishly, coincide with those that promote social harmony. On the positive side, Smith was highly critical of monopolistic privileges of aristocratic society. He proposed the liberation of the spirit of enterprise through competition and a free market and insisted that the function of government was merely to protect the free market from monopoly and privilege and was against state regulation of markets. Smith’s ideas, together with utilitarianism, formed the basis of modern laissez-faire economic theory and were the basis of Thatcherism of the 1980’s. Capitalism has been defined differently by different writers. Saunders (1995) defines it as “a system in which individuals or a combination of individuals compete with each other to accumulate wealth by buying the rights to use land, labour and capital in order to produce goods or services to sell them at a profit in the market” (p 1). According to Marx quoted by
Giddens (1971) “ capitalism is a system of commodity production”(p 46). Producers do not produce for themselves or their families but for exchange in a national or international market (Giddens, 1971). Weber (1992) differentiates capitalism from normal pursuit of gain and desire for wealth, which he says, has existed in most times and places. Western Capitalism, according to Weber, involves a regular orientation to the achievement of profit through economic exchange. This capitalistic endeavour is associated with routinised and calculated administration within a continuously functioning enterprise, disciplined labour force and regularised investment of capital. Further, according to Weber (1992), this Western capitalism is foreign to traditional (non-Western) enterprise, as it could only be the result of economic rationality, which represented the summum bonum of (Western) protestant ethic of making more and more money. In the latter ethic, acquisition is the ultimate purpose of life (although Weber contends, without any eudamonistic or hedonistic mixture), in the hope that material success would lead to election for salvation. This economic acquisitiveness according to Weber (1992) is the leading principle of capitalism. Chapra (1992) notes five distinguishing features of capitalism: 1. Maximum production, accelerated wealth expansion and want satisfaction in accordance to individual preferences is of prime importance. 2. The ownership and management of private property are viewed as essential to secure the unhindered freedom to pursue pecuniary self-interest. 3. Assumes that individual initiative, combined with decentralised competitive free markets are sufficient conditions for optimum allocative efficiency. 4. Minimised role (if any) for government or collective value judgements in allocative efficiency or distributive equity. 5. Claims that collective social interest is served by allowing the self-interest of individuals to reign free.
From the brief explanation of capitalism above, capitalism (and as discussed below Marxism) can be seen as the extension of the materialistic worldview. The secular values of democracy, liberalism, individualism and utilitarianism are incorporated in the capitalistic economic system. Accordingly they lead to certain economic behavioural norms. According to Haralambos and Holborn (1995), “many norms can be seen as reflection of values” and “a variety of norms can be expressive of single values” (p 6). Norms as the researcher stated above, are guidelines to acceptable and appropriate conduct in specific situations. Norms may be written as Law (e.g. safety regulations) or carry informal sanctions such as bodily disapproval. The Western values and the resulting capitalistic economic system lead to certain norms (some in the form of Laws). These include: • Primacy of wealth and profits. Accumulation of wealth is the norm arising from materialistic and individualistic and utilitarian values. Profit maximisation or wealth maximisation is of primary importance and the raison d’être for organisations and individuals. The individual pursuit of material wealth is assumed to lead to optimum social welfare. • The pursuit of individual self-interest is justified and made easier by unregulated markets. Only market prices determine allocation and distribution of resources. Therefore, there are no moral or value judgements in production or consumption of goods and services. Hence, although usury and interest were forbidden or restricted to low rates, as it was considered unjust in the past (Tawney, 1927), it is now justified as a just reward for the use of money and the rate is decided only by market forces. • The sanctity of, and unrestricted rights to, private property. This includes the right to destroy the property (e.g. sheep slaughtered to increase prices) as well as to will it all away as one pleases even to a cat. • Although there is an assumption of perfect competition and information symmetry and efficiency, in reality none exist. The common law legal maxim caveat emptor (buyer beware) reflects the value-less acquisitive philosophy. Consumers are supposed to be careful (as in the common law principle of caveat emptor). As long as sellers do not
flaunt the law, they can get away with gross exploitation, as there is no need to disclose all the information about a product.3 • Consumerism is encouraged through marketing efforts to create demand for wants as opposed to needs, whatever their social or environmental consequences (as long as there is no economic cost to the entity). The only restriction on consumption is affordability and prices. Easy credit expansion and availability avoid even this. There are no value-based restrictions to consumerism (except perhaps the ethical investment and fair-trade movements). • The promotion of competition is through prices and markets. Although, capitalism professes free markets and fair competition, the actuality is cutthroat competition (for example in the microprocessor industry) and the use of intellectual property rights to restrict new entrants (e.g. the case of Intel and Microsoft). Sometimes, prices are cut below cost to get rid of new competitors. The result is an oligopolistic market, where a few firms control an industry. • Taxation and welfare benefits are frowned upon but accepted as the cost of maintaining the system. However, there is increasing pressure to cut social benefits and reduce taxation based on production and shift the tax burden on consumers through valueadded taxation instead of income-based taxation. The previous state services such as education, health and utilities are increasingly being privatised and commercialised.
Although the consumer movement has resulted in many consumer protection laws, the philosophy still prevails. For example, the small print in insurance contracts, and the conditions hidden in footnotes (if at all disclosed) in advertised offers all point to caveat emptor in operation.
Chapter 2 2.3 MARXISM: A REACTION AGAINST CAPITALISM.
As the factories got bigger in industrial Europe, and wealth became more concentrated, the exploitation of the workers began in England and other European countries. The condition of the working classes led to several humanist and socialist philosophies of the 19th centuries including socialism and Marxism. Marx was the opposite of Smith in economics. Marx propounded historical materialism. According to him, Man’s production relations are the origin of all history. Economic, political, religious and social structures (supra structures) are all constructed around the form of production within which men are engaged. This is the basis of his economic determinism. All human history is materially determined and there is a constant class struggle between the rich and the poor, the bourgeois and the proletariat. Feudalism gave way to Capitalism as a result of conflict between the bourgeoisie and the landowners. According to Marx, Capitalism would eventually give rise to communism because of its internal contradictions. In Capitalism, the exchange value was separated from use value. It is only labour which gives rise to value. Capital resulted in the alienation of the working classes by the accumulation of surplus value to the capitalist, which should rightfully belong to labour. Once the working classes realised this, they would overthrow the capitalist. Although this did happen in Russia and China, the system was hijacked by dictators who oppressed and exploited the proletariat even more than their feudal and capitalist predecessors. By getting rid of private property and in the absence of spiritual /religious values man had nothing to work for and nothing motivated them. Hence the collapse of communism in the USSR and the rush to the free market by China. Although Marxism can be seen as the reaction to capitalistic excesses, both economic systems can be seen as characteristically Western as both propound a material worldview. While capitalism consigns metaphysical/religious beliefs to the individual domain, Marxism view the belief system as the reason for the oppression of capitalism and feudalism and therefore must be thrown out of both society and individuals. However, despite its concern
for the welfare of workers, its definition of welfare also coincides with capitalism i.e. material wealth. Hence, capitalism and socialism/Marxism aim at the same objectives, material welfare but only the means to achieve it are different. While capitalism does not concern itself with equitable distribution by insisting on the free operation of markets, socialism tries to control the production centrally. However, it is the same value-free materialistic man in the centralised planning committee of socialism. In the absence of material incentives or a moral filter (Chapra, 1992) corrupt ways of acquiring wealth by the proletariats’ leaders is the result. The communisation of private property resulted in social instability and fall in production due to a lack of economic incentives. The result has been capitalism has unequally distributed wealth while socialism has equally distributed poverty. Despite the apparent success of the capitalist system, it has resulted in many problems. The concentration of power and wealth in the hands of individuals and managers and the economic deprivation of many people even in the developed West has resulted in soul searching among even the rightist elements in modern liberal economic society. Friedman’s (Friedman, 1982) philosophy that business has no social obligations beyond that of following the law is rejected by people who are searching for something spiritual to motivate their society. Thus:
“I am concerned by an absence of a transcendent view of life and the purposes of life and by the prevalence of the economic myth, which colours all that we do. Money is the means of life not the point of it. There must be something we can do to restore our balance. We have allowed ourselves to be distracted by the false lures of certainty which are offered by the competing traditions of science, economics and religion...Economics offers material prosperity as the only universal goal, all else follows ineluctably, according to the laws of the market and the dictates of efficiency...our hearts revolt at the thought that our purposes should be so preordained in one way or another”. (Handy, 1997, p4)
2.4 THE ACCOUNTING IMPLICATIONS OF WESTERN WORLDVIEWS, VALUES AND ECONOMIC NORMS.
Many accountants and users of accounting think of accounting as a mere technical subject. They would therefore pose the question: what have the ‘ true and fair‘ values, which appear in the balance sheets of modern corporations, to do with society, culture, values, religion or
civilisation? The link between accounting and society can be seen if one were to define accounting as Roslender (1992) defines it, not as technical value-neutral subject but as a social institution. He therefore, includes in addition to the constituent parts of accounting such as financial and management accounting, the people who practise the art, the organisations in which they are practised, and the outcomes of accounting. Thus:
“In the same way that science and technology are as much about the ‘greenhouse’ effect’, or the search for geologically appropriate burial sites for ‘safe’ nuclear waste, so accountancy commonly involves lost jobs, restricted choices and reduced safety standards, all of which may, quite knowingly, make the world a much worse place today, tomorrow, forever perhaps”. (Roselender, 1992, p3)
According to Burchell et al. (1985), accounting is “coming to be seen as a social rather than a purely technical phenomenon” (p 381). They opine that the ways in which accounting emerges from and itself give rise to the wider (social) context in which it operates is slowly being recognised. Hines (1988) views that reality does not concretely exist independently of the concepts, norms, language and behaviour of people. Although people create society, however, at the same time, their concepts, norms, language and behaviour become institutionalised. Hence, accounting both reflects reality (or perceived reality), but the rules through which accounting reports communicate reality, itself constructs reality. Hence, accounting both affects and is affected by worldviews, values and perceptions of society. The relationship of the worldviews, economic objectives, values and accounting is depicted in Figure 2-1 on the next page. The researcher assumes that initially the worldview and values of the society (arising from religion or intellectual movements) give rise to its social and economic objectives4. The society then sets its economic norms and Laws
. This view is different from historical materialism of Marx who views that production relations (economic objectives) lead to the establishment of political and religious superstructures (worldview and values)
FIGURE 2-1:THE SOCIETY / ACCOUNTING INTERFACE
WORLDVIEW AND VALUES
SOCIAL AND ECONOMIC OBJECTIVES
2 ECONOMIC NORMS and LAWS
ECONOMIC & SOCIAL BEHAVIOUR (TRANSACTIONS)
accordingly, in an attempt to achieve these socioeconomic objectives. These norms then regulate individual and collective social and economic life through transactional behaviour. When people associate and transact to achieve economic and social purposes, there are information requirements of both internal and external stakeholders to the various organisational setups, the process of organisation may involve separation of ownership from management of resources. Accounting plays a leading role in providing this information. The transacting individuals, in order to control and guide the organisations (e.g. buying, selling shares or dismissing directors) act upon this information to achieve their social and economic objectives consonant with their worldview and values (Arrow marked 1). However, if the accounting system used is one which is infused with values alien to those of the host society, then the information it produced may result in incorrect economic behaviour. This in turn results, in the long run to a change or at least a compromise in its world-view and values (arrow marked 2 in figure 2-2). This in turn leads to the achievement of different social and economic objectives, which will result in a change in the economic norms and laws to one, which is in line with the new objectives. Modern corporate accounting is the result of the development of accounting in industrial and capitalistic environments. Tinker et al. (1982) observe that contemporary accounting
assumes a marginalist economic theory representing a utility-based concept of value. They assert that individualism and ‘objective’ market price based on a utility-based concept of value is the result of a realist ontology of accounting in which an objective truth exists independent of the subject. They use a dialectical materialist epistemology of accounting to expose the partisan role played by accounting in social conflict rather than being objective and value-free as held out to be by positive accounting theorists. Gray et al. (1996) are of the view that conventional (Anglo-American) accounting is justifiable only by reference to the conception of a ‘pristine liberal economic democracy by which Western developed nations, especially North America, Britain and Australia, could be conceptualised” (p 15). Although the pristine form of the liberal economic democracy does
not exist in these countries, these values, they opine are integral to the notion of contemporary Western civilisation. Arrington (1990), considers that accounting is implicated with the negative consequences of modernity through its orthodox rationality and its preoccupation with the search for an objective reality for its own sake. He suggests accounting knowledge should be based on solidarity i.e. that which is useful to the community. Gallhofer & Haslam (1995) accuse the Benthamite (modern) accounting of focusing
attention on profit in Western capitalistic economies, a focus that isolates corporate agency by expressing it in purely financial terms and which deflects attention from its social, economic and political consequences. An alternative post modern view is presented by Cooper et al (forthcoming), who conceive the accounting construct as an obsolete product of modernity which has lost all relationship to the economic reality it purports to represent. The only meaning left in annual accounts therefore, is the aesthetic signification, which vaunts the idea of balanced accounts, which complements the visual design of contemporary annual reports. They further consider that accounting as an instrument of the modernist project has subjugated human beings to the control of a discipline that privileges numbers in the construction of social reality. From the above brief citations, it is clear that conventional accounting is the product of modernity and is value based. The result is that the objectives, characteristics and consequences of accounting reflect these values and norms. For example, the materialist worldview and utilitarian economics give rise to the accounting objective of providing information for finance providers to make decisions, which will increase their wealth (the decision usefulness objective). The characteristics of objectivity, neutrality, historical cost, entity, going concern and monetary measurement are all geared towards the financial enrichment of shareholders and creditors even at the expense of damaging social and environmental consequences. MacNeal (1970) for example considered that historical cost concept was the result of and appropriate for the increased used of bank debt financing in the Middle Ages, which is
complete inappropriate today. Further, MacNeal (1970) trenchantly criticises the going concern theory and its consequent going concern values arguing that although a fixed asset may be carried for a long term, investors change during this period. Therefore, if investors were not given the market values, it would favour the insider who can buy up the shares, knowing the real values of the assets and rake in the profit at the time of realisation. This is tantamount to defrauding the previous shareholder who would have sold his shares for a value less than its worth. Since individualist, utilitarian values do not consider the equitable distribution of wealth, the persistence of the historical cost, prudence and going concern principles in conventional accounting may perhaps be attributed to these ‘Western’ values. Further, the entity and monetary measurement concepts, by relegating the damaging effects on the social fabric and environment as externalities, means that accounting hides itself in the clothes of objectivity by not measuring these at all (Maunders & Burrit, 1991) As accounting itself creates reality by communicating it, it leads to certain behavioural consequences, which is in line with the materialistic utilitarian worldview of capitalism. These include competition, conflict and domination (Miller & O’Leary, 1987). It can thus be seen that a worldview affects values, which in turn affect economic norms, and objectives and these in turn have implications for accounting. Different worldviews and values therefore should lead to different accountings. The researcher shall next present the Islamic worldview, values and economic norms and show how they differ from those of the West.
2.5 THE ISLAMIC WORLDVIEW AND VALUES
Islamic ontology presents a dual worldview, this world (universe) and the hereafter. What man does (in all areas) in this short life affects his prospects in the hereafter. Izetbegovic (1984) views the Islamic worldview as a distinct and unique paradigm, which is separate from the ‘religious’ worldview (represented by) Christianity and the secular worldview represented by the West. Although there may be similarities to the religious or Christian
worldview in some aspects such as belief in life after death, there are some basic differences, which make Islam unique. Khurshid Ahmad views Islam as unique to the fact that it is a religion based on a Book- the Qur'an, which has fashioned the unique identity of Muslim culture and civilisation (Mawdudi, 1988). The Qur’an is believed by Muslims to be the literal words of God revealed in Arabic to Prophet Muhammad (pbuh). Unlike the Bible, it is not a compilation of several books written in different historical periods containing God’s commandments, sayings of the Prophets, oral traditions and historical accounts of Jewish and early Christian life and epistles of the apostles of Jesus (pbuh). Muslims separate these ‘Words of God’ (in the Qur’an), words and actions of the Prophet (pbuh) (in the Hadith) and historical material (Prophet’s biography, early Islamic history etc.) into different books. Only the Qur’an is considered direct divine revelation and the Hadith- an exemplification of the Qur’an by the Prophet (pbuh) in real life. The Islamic worldview is therefore synonymous with the Qur’anic worldview. According to Khurshid Ahmad:
“the Qur’an is a book of movement. It presents a message, invites the whole human race to a view of reality and society, organizes those who respond to this call into an ideological community and enjoins upon this community the social-moral reconstruction of humanity both individually and collectively.” (Foreword to Mawdudi, 1988, p xiv)
According to Mawdudi (1988): The Qur’anic view of reality is as follows: a) Allah (God), the one and only Creator and Sovereign of the entire universe created man with a capacity for cognition, reflection and understanding with the ability to distinguish between good and evil, with the freedom of choice and volition and appointed him as His vicegerent (Khalifa) on earth. b) Despite this freedom of choice, God alone is the absolute Lord and Sovereign. Hence, man should not consider himself independent but to worship and obey God. c) The life of this world is only a short prelude to the everlasting life after death. The whole universe will come to an end one day. The world is a place of test of the trust God has placed in man. He is accountable to God, who will judge him based on his actions on this life. If man chooses the right way and obeys God’s commands in this earthly life, he
will be rewarded with eternal bliss and happiness in Paradise. If he fails to do so, he will experience the evil effects of corruption and disorder in this world and will taste eternal grief in Hell in the hereafter (if he does not ask forgiveness and repent to God directly in his earthly life, for his transgressions). d) The right way of God is revealed to a line of men whom He has selected as Prophets (pbut), from the first man Adam (pbuh) to the last Prophet Muhammad (pbuh). Some of these Prophets received scriptures (such as the Torah, Psalms and the Evangel) others received it in the form of scrolls (e.g. Abraham and Moses pbut). He has sent Prophets to every nation before Muhammad (pbuh). All Prophets carried the same essential message i.e. to worship only God and to obey His commandments that was revealed to the prophets. Although there were certain basic commandments, which were common to all prophets, details were different with the condition of the various nations to which the Prophets came. e) The final Prophet Muhammad (pbuh) was the first world Prophet for the whole of humanity and not just the nations he was sent to. The Qur’an being the last scripture until the Day of Judgement, had more comprehensive principles and some details on many facets of life including the political, social, criminal, ritual, family and economic spheres. Unlike messianic religions like Christianity, Islam seeks to organise into one political and ideological community all those who accepted it, to mould this society in accordance with God’s guidance and strive to reform entire mankind.
From the above, it can be seen that the Islamic worldview is in fact a dual worldview, this world of action and accountability for the actions in the next. The Islamic values from the above worldview has been summarised by Abdalati (1994) as: a) Tawhid (Unity) which is the foundation of Islamic belief. b) Khilafa (vicegerancy) c) Ikhtisab (accountability) and d) Adalah (Justice) The concept of Tawhid (Unity and Oneness of God) implies that since there is only One God who is the creator and sovereign of all (humans and non-humans), Islam (literally meaning submission) requires total submission to Him in all aspects of life. To be a Muslim is to make God the Judge and Sovereign from whom is derived all laws, values and norms
and to do all God has directed and for His sake according to His will (as revealed in the Qur’an). This is the meaning of worship in Islam which the Qur’an describes as the purpose of creation. As Haneef (1997) asserts that “it is in this sense that even economics become part of the ‘religion’ ” (p 44). Tawhid has direct implications for politics and economy. The Qur’an enjoins consultative government (Shura’). However, it does not enjoin democracy in the sense, that the people have the absolute right to make laws in accordance with their own whims and fancies. Sovereignty in Islam is to God alone, not to the ruler (even of an Islamic state) or the people. Hence, any laws whether social, economic or accounting cannot contradict the Qur’an, which serves as the constitution of an Islamic state. There is also no separation of the Mosque from the State and hence Islam vehemently opposes the principle of secularisation. All areas of life including the political, economic and social must be consistent with Islamic values. According to the concept of Khilafah (vicegerancy) Allah created men to be his khalifa (vicegerants) to carry out his divine Will on earth. Thus, khilafah implies trust and responsibility, authority and duty, election and service (Abdalati, 1994). Man holds a position of high-ranking status in the hierarchy of all known creatures due to his possession of rational faculties and spiritual aspirations as well as powers of action. However this rank engenders responsibility. As God’s agent, he is necessarily imbued with authority and power but in addition honour and integrity. His position confers upon him certain rights over other creatures. Animals and plants have been created for man to enjoy and use and for his benefit. Nevertheless, plants and animals, in addition to his own life, religion, family, property, honour and intellect are a trust which Allah has granted man. This concept of trust or amanah puts some restriction on the use of economic resources. The concept of Khilafa has direct repercussions for liberalism and freedom. Although God has given freedom of choice and action to man, he is nevertheless commanded to act according to God’s will i.e. within the Islamic framework. Hence, Islam cannot condone gambling and interest-based finance or the absolute freedom to do with one’s property as one pleases. Property should
be earned and must be seen as a trust from God in which the disadvantaged in the community have rights. Accountability (ikthisaab) to Allah for one’s actions is the next key Islamic concept. The Muslim belief in God’s Judgement implies that every act in this world will have to be accounted for to Allah when man will be resurrected both bodily and in spirit in the hereafter. The central purpose of a Muslim by definition is to submit to the Will of Allah and seek His pleasure (rida’) and his rewards in the Hereafter. Any lawful act done with the intention of pleasing Allah is considered worship in Islam. “To worship God is to ‘live’ life not to run away from it” (Abdalati, 1994, p15). Associated with this concept is the belief in rewards and punishments. According to the Qur’an, there are two angels with every human being who records their every act and this record of reward and sin, will be presented to them on the day of Judgement as evidence for or against their acts. Allah will judge all the people according to His commandments, which He revealed to the various Prophets. The scales of judgement (Al Mizan - literally measure) will be set up to measure the good and the bad deeds. Man is especially accountable to God for his life, youth, wealth (how he acquired and spent his wealth) and knowledge. Believers with more good deeds than bad deeds to their credit will be sent to Paradise whereas a person with more bad deeds will be consigned to Hell (unless God forgives them). The belief in the Day of Judgement according to Abdalati (1994) is the “final relieving answer to many complicated problems of our world” (p 17). According to him the apparent injustice of criminals getting away with their crimes produces an air of hopelessness which would result in apathy. “If the good people who are sincere and virtuous seem to be suffering and the criminals can escape from mundane laws, who, then is left to promote the cause of morality and goodness” (ibid, p 17), he asks. However,
“This is not to condone injustice or tolerate mischief in this world. It is not to sedate the deprived or comfort their exploiters. Rather it is to warn the deviants from the Right Path and remind them that the Justice of God shall run its full course sooner or later”. (Abdalati, 1994, p17)
Accountability requires every Muslim to ensure that every word and deed in this world is in line with Islamic teachings, whether in the matter of performing their prayers or buying shares in the stock market. Muslims have an extended concept of utility i.e. God given pain and His pleasure in the hereafter rather than the material pain and pleasure of this world. God’s pleasure also requires discharge of responsibilities and trusts to other fellow creations, Muslims, Non-Muslims, animals and the environment. It is not charity to give from one’s wealth to an underprivileged person or group but rather it is their right on his wealth. Contracts, whether commercial or non-commercial have to be kept. Hence, although accountability is individual and not vicarious, the responsibility to one’s family, neighbours, community and humanity as a whole and the objective of seeking God’s pleasure serves as a check on the excesses of individualistic behaviour and places the individual in the context of the community. Justice (Adalah or Qist) is the utmost political, social and economic principle in Islam. The Qur’an says:
“We sent aforetime Our messengers with Clear Signs and sent down with them The Book and the Balance (of right and wrong), that mankind may establish Justice”. (Al-Qur’an, 57: 25)
“Allah commands justice, the doing of good (equity), and charity to kith and kin, and He forbids all shameful deeds and injustice and rebellion: He instructs you, that you may receive admonition”. (Al-Qur’an, 16:90)
The stress on Justice has implications for politics as well as economic objectives and policy prescriptions. The establishment of justice implies political power, which has to be undertaken within the concept of Khilafa. Hence from the earliest times Islam never separated itself from politics or government. The Qur’an gives certain governing principles for government but does not require any particular political system except that there must be a political mechanism to unite the Muslims under the authority of a Khalifa. Muslims are supposed to be ruled by shura’ (or consultation) and all executive orders are subject to the Shari’ah or Islamic Law derived from the Qur’an and Hadith (see section 2.6 below).
The concept of justice and equity also implies the objective of individual and social welfare and public benefit as the objective of an Islamic state. This is especially pertinent in an economic framework. Hence, not only productive and allocative efficiency but distributive equity as well is sought in an Islamic economic framework with the aim of achieving social welfare and stability. Hence, production of certain goods, which may be economically justified (in terms of good monetary returns) cannot be undertaken due to its effect on social welfare, for example, alcohol, interest-based financing or gambling operations.
2.6 THE IMPLICATION OF ISLAMIC WORLDVIEW AND VALUES FOR ECONOMIC NORMS AND CODES: THE SHARI’AH AND ECONOMIC OBJECTIVES
The Islamic values described above have implications both for individual and collective economic behaviour. These economic (as well as non-economic) values, norms and codes are inscribed in the Shari’ah (Islamic Law). However, Islamic Law (the Shari’ah) is not the same as Law in the Western sense, where Law is promulgated by parliament, monarch or president and carries state sanctions. Shari’ah includes Law (as it is normally known in the West), ethics, and religious doctrines. The Law part is justiciable but the non-justiciable ethics (or akhlaq) and religious doctrines may play a more important part in Muslim behaviour. The Shari’ah is derived from the Qur’an and Hadith. According to Kamali (1989), the Shari’ah “refers to commands, prohibitions, guidance and the principles that God has addressed to mankind pertaining to their conduct in this world and salvation in the next” (p 215). The whole system of Islamic Law or what is today called the Shari’ah includes Fiqh or Islamic legal rulings developed over the course of 14 Centuries by the methodology of consensus, analogy, deduction, legal opinion from considerations of the public interest and welfare, and from customs which were Islamised. These methodologies form the discipline of usulul-fiqh (sources and principles of Islamic jurisprudence). However, while Shari’ah principles and rules from the Qur’an and Hadith are held to be immutable, the fiqh rules can
change within the Islamic framework to accommodate changing time and conditions thus Ramadhan (1992) argues:
“Juristic reasoning is never final, whether it be reasoning on the implications of these very texts or reasoning pertaining to occurrences in the absence of a directly applicable text...Did the founders of our schools (of Islamic Jurisprudence) ever claim finality for their reasoning and interpretations? Never! The teaching of the Qur’an that life is a process of progressive creation necessitates that each generation, guided but unhampered by the work of its predecessors, should be permitted to solve its own problems”. (Ramadhan, 1992, p 63)
The elaboration of the Shari’ah into fiqh, however, should be undertaken within the worldview and principles and rules of the Qur’an. In reality, due to certain historical reasons, Islamic fiqh on commerce (and politics) has ossified and are not as developed as in the West. This is part due to interpretation of Muslim Scholars have in the past, been mainly of a literalist/technical type with a concern with sticking to the text as close as possible. However, there have been recently an emphasis on the theory of the Maqasid al Shari’ah or objectives of the Shari’ah first promulgated by Al-Shatibi in 14th Century Muslim Spain (Masud, 1997). This theory offers a way out of this ‘time-hole’ in which the Muslims find themselves. Kamali (1997a) observes:
“By comparison to the legal theory of the sources- the usulul-fiqh, the maqasid al Shari’ah are not burdened with methodological technicality and literalist reading of the text. As such, the maqasid integrates a degree of versatility and comprehensive into the reading of the Shari’ah that is in many ways unique and rides above the vicissitudes of time and circumstance. At a time when some of the important doctrines of usul al fiqh ...are seemed to be burdened with difficult conditions...that might stand in a measure of disharmony with the prevailing socio-political climate of the present day Muslim countries, the maqasid have become the focus of attention as it tends to provide a ready and convenient access to the Shari’ah”. (Kamali, 1997a, p 20)
The maqasid al-Shari’ah or the objectives of the Shari’ah is very important in determining the type of detailed rules which ultimately emerge from the process of ijtihad or continuous exertion to derive law and rules (for example, in economics and accounting) from basic principles of the Qur’an. The Maqasid or Objectives of the Shari’ah could be termed as the spirit of Islamic Law which should influence the development of Islamic Law even at the expense of the literal technical principle.
The realisation of Maslaha (public benefit or welfare) to the people is considered one of the principal objectives of the Shari’ah. Thus, (Chapra, 1992), quotes the Muslim philosopher, Al-Ghazali :
“The very objective of the Shari’ah is to promote the welfare of the people, which lies in safeguarding their faith, their life, their intellect, their posterity and their wealth. Whatever ensures the safeguarding of these five serves public interest and is desirable”. (Chapra, 1992, p1)
According to Ibn Ashur (1966), the most important objective of the Shari’ah as regards wealth is to protect the Ummah’s (Global Muslim community) wealth and make it available for their use through controlling its public as well as individual management. Most of its regulations pertain to the protection of the individual’s property as it leads to the protection of the community’s resources in aggregate. This does not mean absolute right of individual ownership but to the person or group most likely to use it wisely in the public and owner’s interest . Hence, in certain cases, it even means depriving the unsuitable person of it and holding it in trust for him.
“It is the concern of the Shari’ah to see that its management is controlled in a way that would secure its distribution among people as far as possible and to help its growth in itself or in its considerations regardless of whether the direct beneficiaries are private individuals, groups, or sectors, large or small.” (Ibn ‘Ashur, 1996, p5)
Ibn ‘Ashur has listed several objectives (or values) of the Shari’ah for Economic activity including (i) circulation of wealth, (ii) security, (iii) authenticity, (iv) equity, (v)dignity of labour and (vi) morally filtered consumption.
2.6.1 Circulation of Wealth
Wealth should be circulated widely and not held or concentrated in a few. The concentration of wealth in the hands of the few can lead to disastrous social and political consequences, which are enumerated elsewhere. This norm is a direct consequence of Tawheed (Oneness of God who cares for all his creation instead of ‘chosen’ few) and in keeping with the concept of Adalah (Justice). To encourage circulation of wealth, the Shari’ah encourages
trade. The Shari’ah encourages commutative sales contracts and thus encourages the attainment of a monetised economy rather than barter. On the redistributive side, the Shari’ah also institutes Zakat which is the third ‘pillar’ of Islam. It is a religious tax based on wealth or income depending on the category of wealth. It is obligatory on all Muslims who possess wealth beyond a fixed minimum and hold it for at least one calendar year. The Islamic State collects it, in the absence of which individuals are obliged to pay it on their own to the beneficiaries designated by the Qur’an (poor, indigent, travellers, bankrupt, zakat collectors, to liberate slaves or oppressed people and “in the way of God”. Traditionally, Zakat is only payable on gold and silver (and by
extension money), business inventory and profits, livestock and farming output of staple food crops. Its basic rate is 2.5% but in case of agricultural output it is 5% or 10% depending on whether the land is irrigated naturally or otherwise. Zakat on cash and savings at 2.5% of value acts as a disincentive to holding wealth in a zero interest environment. In addition to Zakat, sadaqah (voluntary charity) and waqf (endowments) are encouraged. From, the earnings side, the Shari’ah prohibits Interest. Interest may lead to unearned wealth accumulation while avoiding to a large extent, risk that besets the borrower. Interest both on consumer and commercial loans is totally prohibited in Islam. (Alternative views on interest are discussed in Chapter 5). The result of this is interest-based banking and fixed return securities which are the corner stones of modern finance and investment are totally prohibited in Islam. This is the reason for the growth of Islamic banking (discussed in Chapter 5). On the other hand, Equity based partnership, shareholding and commenda are allowed for capitalists to join in a business venture with labour to reap the rewards of productive investment. The only form of fixed return allowed is the murabaha (cost plus) contract which allows the sale of a product at a higher price on a deferred basis than on spot on the pretext that this is to cover for opportunity cost of the trader. The only form of loan is the interest-free loan (qard hasan).
Hoarding and monopolies (except state monopolies) are not allowed in Islam. The giving of just measure for measure is essential and a whole institution (the Hisba) pertaining to just weights and measures and surveillance of market activities to root out fraud has been part of Islamic economy for a long time (Taymiya, 1985). The prohibition of gambling can also be seen as an obstacle to wealth concentration as is evidenced by the enormous profits of casinos and lotteries. There is also an elaborate law of succession in the Qur’an and Hadith of the Prophet (pbuh). The Shari’ah has specified the beneficiaries of an estate together with their shares rather than allowing the testator to do as he wishes. This stipulation seeks to redistribute property to the nearest relatives of the deceased in a fair manner so that the deceased cannot will away the property to others while leaving his children to poverty. However, an individual can will away one third of his property to other than the stipulated beneficiaries. . This is one of the restrictions of property ownership in Islam. This ensures the redistribution of wealth and its circulation.
The Qur’an extols the believers not to eat up each other’s properties in vanities but exchange in trade or in goodwill. A regulated market system, control of monopoly, public endowments and perhaps internal auditing and control procedures are essential to protect it. Depriving the incompetent from administration of their property and administering it in trust for them is provided for in Islam
This means clear evidence of ownership or of earning the property and is achieved either by having a written rather than oral contract e.g. in case of loan contracts and/or having witnesses during the making of a contract. A whole string of fiqh rulings have been derived to make up the Shari’ah law of contracts5 regarding validity, fulfilment of obligations,
Vogel and Hayes (1998) have given a detailed analysis of financial contracts in Islam
rescinding etc. To increase validity of ownership, Islam obliges witnessing of many contracts except those of spot transactions.
The Shari’ah insists on a free competitive market in which prices are determined by supply and demand. The Prophet (pbuh) refused to intervene in the market he established in Medina (Kallek, 1995) when prices rose. However, despite this the13th Century Islamic scholar Ibn Taymiyah (Islahi, 1988) argued that the state can fix prices in times of dire public need (emergencies) and during market imperfections. The Shari’ah also encourages complete information symmetry, for example, no fraudulent labeling or false or misleading description is allowed. Hoarding and monopolies are prohibited. Conventional insurance contracts based on uncertainty and speculation and having an element of gambling are prohibited. This is replaced by takaful, an insurance scheme based on co-operative saving. Both public and private ownership have their roles in an Islamic society. According to the Qur’an the purpose of prohibiting the giving and taking of interest is also the prevention of injustice (Al-Qur’an 2: 79)
Chapter 2 2.6.5 Dignity of Labour
Islam upholds the dignity of labour and lawful endeavours to earn one’s livelihood and to provide for one’s family and relations. It encourages one to work and prohibits begging or living on benefit unless one is unable to work e.g. in case of invalidity, involuntary unemployment, children and the aged etc., the latter should be supported from pensions from Zakat and other sources. For those who do not have capital, Islam encourages mudharaba or commenda where the labourer can partner with the capitalist to carry out an industry or trade and the profits shared in agreed proportions. In case of loss, the capitalist will bear the entire amount whereas the labourer loses his labour. This has become an instrument of Islamic bank financing, although not a successful one due to agency costs and moral hazard problems (Obiyathulla, 1995). Labour should be paid fair wages, which allows him the basic necessities of life. The employer is encouraged to pay a wage which will allow the employee to have a similar standard of living as the employer and immediate payment is encouraged as non-payment of wages has serious repercussions for the spiritual well being of the believer (Khan, 1989). Further the employees should not be given work beyond their capability and capacity. All labour contracts, involving servitude or
slavery are declared invalid. The Shari’ah contracts regarding labour gives certain exemptions on gharar (or uncertain contracts e.g. share cropping) because there would be hardship to the people if it were not allowed. These contracts also result in increase in production by cooperation between labour and capital.
2.6.6 Morally Filtered consumption:
Modern marketing and business create excessive wants and demand, which cannot be met equitably due to scarce resources. However, the creation of excessive demand or wants rather does not ensure the basic needs of society are fulfilled, inspite of ‘trickle down theories’. The capitalist consumerism patterns of the West and their export to developing countries has led to a real danger of sinking mother earth due to limited environmental
resources. These have led to inequitable distribution of wealth and social injustice perpetrated on other countries and communities by the rich and powerful in the name of economic interests (Caufield, 1998). According to Chapra (1992), the most challenging task in ensuring that resources are both efficiently allocated and equitably distributed, is that of motivating individuals to hard and conscientious work. There is also a need to make the necessary changes in consumption, investment and saving behaviour to realise social welfare as envisioned by the Maqasid al Shari’ah. He criticises both socialism and capitalism for their naiveté and impracticality, the former for “expecting individuals to work efficiently even though it deprived them of the opportunity to serve their self interest” (p 252) and the latter for assuming that self-interest and social interest would always be in harmony. Therefore,
“It is not possible to motivate individuals to be both efficient and equitable unless a moral dimension is injected into their pursuit of self-interest so that social interest is not jeopardised even when it is in conflict with self-interest”. (Chapra, 1992, p 252)
Islam provides this moral dimension in encouraging a moderate lifestyle and prohibiting a ostentatious and opulent lifestyle of the rich and famous (Khan, 1989). In fact the word for economics, iqtisad by itself means moderation. According to Khan (1989), “a Muslim is required to adopt a moderate attitude in the acquisition of and utilisation of resources”(p 77). The Qur’an and the Prophet (pbuh) have condemned the two extremes of consumer behaviour; israf (extravagance) and bukhl niggardliness. The simple unpretentious lifestyle of the Prophet (pbuh) and his Companions’ example of living in almost poverty conditions, and the examples of the Rightly guided Khalifs and most of their governors are always presented as a standard and challenge to all Muslims who regard them as examples. Luxury is frowned on e.g. man cannot wear silk and gold. It is also prohibited to use golden or silver utensils. Conspicuous consumption is frowned on as is ostentation and wastage. In many rural areas, this value still holds, but the advent of global capitalism has infected Muslim societies where the young yearn for the trappings of modern consumer lifestyle. However, the Shari’ah rules and Islamic education and culture
produce a controlling effect on Muslim consumer behaviour (Ahmed, 1992) and serves to restrict conspicuous consumption in Muslims societies although Kuran (1995) disputes this fact:
“In most countries efforts to inculcate Muslims with behavioral norms drawn from classical sources of Islam have been limited to publications, educational programs in the mass media and the incorporation of Islamic economics into school curricula. Only in Iran have efforts gone much further, Islamic councils have been set up at Iranian factories and offices. There is no evidence that such measures have brought about the behavioural changes envisioned in Islamic texts. Nor is there evidence from any other country that the emphasis on Islamic morality has altered work patterns or business relations although such factors are notoriously difficult to measure”. (Kuran, 1995, p165)
Although there may be some truth to Kuran’s claims he has provided no empirical evidence to support his thesis. Chapra (1992) insists that Islam provides both a filtering mechanism (by its prohibitions of luxury consumption) and motivating factor (in the promise of rewards and God’s pleasure in the after-life) which induces everyone to abstain from making ‘unnecessary claims’ on resources. Thus:
“The moral system (of Islam) influences the inner consciousness of the individual, makes him aware of the trust nature of resources and provides the criteria needed for their efficient and equitable allocation and distribution. It also makes the individual conscious of his unavoidable accountability before the all-knowing God, thus serving as a strong motivating force for not pursuing his personal preferences and self-interest in a way that hurts the realisation of social well being. This helps prune a substantial part of the demand for goods and services even before it finds expression in the market place”. (Chapra, 1992, p 348).
According to him, the price system alone, although indispensable, is not enough to realise equity as it allows the rich to buy luxuries and status symbols, no matter how high their prices are raised while it leads to suppression of need satisfaction of those unable to afford these status symbols. This leads to the unintentional allocation of resources in favour of status symbols and squeezes their availability for need satisfaction.
Chapter 2 2.6.7 Prohibition of immoral and unsocial contracts
Investment and trade in industries involving products and services which are religiously and morally reprehensible in Islam such as alcoholic drinks, tobacco, pornography, gambling and interest-based financing are declared haram (forbidden and sinful) and are prohibited. This is to discourage the growth and spread of these industries. All contracts must be clear and any uncertain contract (gharar) e.g. buying the fish in the pond is illegal. This is to avoid damage, conflict and disputes.
2.7 ACCOUNTING IMPLICATIONS OF ISLAMIC ECONOMIC VALUES AND NORMS
In accordance with the Islamic value of accountability, justice and keeping of trust, a decision-usefulness framework is not suitable for Islamic society. The Islamic objective of maslaha and welfare points towards a more social oriented accounting especially for large organisations. Further, the prohibition of interest results in the absence or reduction of debt financing (although the so-called Islamic debts are issued in Malaysia). This together with the objective of social welfare orientation makes stakeholders other than shareholders, as important or perhaps more important. This new importance accorded to other users make the slant towards shareholders (in conventional accounting) inappropriate to Islamic accounting. The same concepts of accountability and justice to all of God’s creations mean that Islamic accounting would need to recognise and account for what is now considered as externalities. This means that the monetary measurement concept may not be appropriate. Further, there is a need for new profit sharing models in accounting to equitably account for different classes of equity based investors (especially in banks) (see Chapter 5 for a more detailed exposition). The problem of assessing Zakat and preserving equity between current and future investors may also require current valuation especially in times of rising prices. To avoid a tendency towards materialistic individualism, profits may need to be decentred in an Islamic accounting system. Hence, a new accounting report incorporating non-
financial measures, which measure the all- round record of Islamic organisation rather than its monetary performance may need to be devised. An Islamic version of the balanced
scorecard (Kaplan & Norton, 1996) type of accounting report may be appropriate in order to induce Islamic behaviour. Finally, Islamic accounting needs to report any activities undertaken by the organisation, which are prohibited by the Shari’ah. In addition to other socioeconomic transactions not normally reported in conventional accounting reports e.g. state of employee-employer relationship, Zakat collection and payment as well as social and environmental effect of the organisations activities needs to be disclosed. This information will enable users to ensure that their Islamic organisations are operating within Islamic parameters.
2.8 A COMPARATIVE ANALYSIS OF WESTERN AND ISLAMIC VALUES AND THEIR IMPLICATIONS FOR SOCIOECONOMIC NORMS AND ACCOUNTING
From a Western perspective, the Islamic worldview would be seen as a retrogressive religious worldview, which attempts to turn the clock back from secularist thought. The Christian religious experience of the West creates a mental spectacle through which is seen an image of Islam attempting to revert to absolutist doctrinal authority of the “Church”, which is inconsistent with science and reason. However, this secular view is not necessarily acceptable to all societies and civilisations. It is a description of the European experience and history of Western Christianity. As Eliade (1987)6 holds, secularism is a Western product:
“This dichotomy between the religious and the remainder of human life is a western product and concern...This distinction between the sacred and the profane, between religion and other aspects of human endeavour is a result of the process of secularization that has been the experience of Christian/Western civilisation especially (Eliade, 1987, p 12 as quoted by Haneef, 1997, p40) since the 17th Century”.
It can be seen from the discussions above, the worldview and values and their corresponding economic norms and codes of the West and Islam are quite different. While the West went through a number of intellectual and technological development phases, the
Muslim worldview is derived from interpretations of its scriptures, the Qur’an and the Hadith. The West swung from intellectual movement (Greek philosophy), secular government (Roman Empire), ascetic religion (Monasticism, Roman Catholicism and Schoolmen), business as a religious ‘calling’ (Protestantism) and back to secular, humanistic intellectual movements of the enlightenment, modernism and post-modernism phases. It also went through industrialisation and technological development not characteristic of Islamic society (see for example Russell, 1995; Davies, 1997). Muslims developed knowledge mainly in the religious sciences and grappled with the problems of real life by the interpretation of its scriptures through deduction and consensus. After a period of ossification due to its own historical development and colonisation, Muslims are striving to reestablish the flexibility and adaptability of Islamic Shari’ah to contemporary requirements. Even when Christianity held sway over Europeans in the Middle Ages, there was a certain secularistic schism between Church and State and between the sacred and profane. The renaissance, reformation and enlightenment were movements away from religious authority. Muslim history, however never had a movement away from its religion, although there was degradation in the political framework from consultative accountable governance to despotic monarchies (currently ‘Presidents’). Only in its recent colonial and post-colonial history was state law separate from the religious. However, despite the incredulity of the West, Muslims want to go back to religion instead of away from it as demonstrated in the Islamic resurgence in Muslim countries. The world-view of Muslims is one of the dual-worldview of Islam as envisaged by its scriptures. Religion is becoming less and less relevant to economic activity and consumer behaviour in the West. On the other hand, Muslims want to forge an Islamic economic system in line with the economic values and norms consistent with their religious teachings (Islahi, 1988). Thus, the different worldviews and values give rise to different economic objectives and economic/moral norms, which in turn lead to different behaviour patterns (real and ideal). This in turn, the researcher believes, requires different accountings, which
Eliade (1997), Encyclopedia of Religions, Vol 12.
give the appropriate information, which will lead to proper decisions and economic conduct conducive to their respective world-views.
2.9 WORLDVIEW AND VALUES: A COMPARISON
The world-view of Islam and values of Islam were discussed above. Briefly these are a dualworld view, divine unity (tawhid), vicegerancy (khilfah), accountability (ikhtisab). From the principle of tawhid arises unity of state and religion as opposed to the secularism principles of the West. From the Western perspective, the current worldview may be termed as materialist fundamental secularism. Religion is consigned to private life if at all. The Post-modernist trend of incredulity of meta-narratives seems to imply that there is a lack of purpose and mission in life (see Handy, 1997). Generally, there is a lack of belief in the hereafter as the ultimate purpose of life. Even though surveys conducted show a general belief in God (e.g. Ashford & Timms, 1992), His nature, purpose and relevance to worldly life is at best confused in the minds of Westerners. It seems to the researcher, that economic materialism has not only become a way of life but the ultimate purpose of existence in the West. The general idolisation of science and technology, breakdown in family life coupled with individualism, utilitarianism and consumerism combined with nihilism seem to characterise Western life. The concept of naturalistic liberty and democracy has led to legislation as the main means of consensus in moral and legal values. Further the concept of liberty and individual rights has got out of hand with unrestricted property rights and privatisation of public resouces which serves to concentrate wealth in the hands of a few and leads to waste, extravagance and environmental destruction (Arnold & Cooper, 1999; Maunders & Burrit, 1991). However, there is growing concern for the inequity, social welfare and environmental problems but lack of a fundamental purpose result in lack of consensus among the different groups in Western society on how to solve these problems (see Gray et al., 1996; Gray & Bebbington, 1998).
On the other hand, the Muslim world is characterised by a lack of political unity, ‘democracy’ and material progress although Islam itself stresses unity, consultative rule and encourages active participation in this worldly life. This is evidenced from its early history of egalitarian and just rule and its later scientific and cultural golden age during Europe’s dark ages. However the sources of Islamic teachings are intact along with the will of the Muslim masses to change their societies to one enjoined by Islam and hence, resurgence. Although it may seem inconsistent to compare ‘practical’ Western values with ‘theoretical’ Islamic ones, the Islamic values are not the theoretical concerns of the clergy but as a whole practised in the social and economic life of Muslims. This is despite the secular or feudal unrepresentative regimes ruling the Muslim world today. The fact that Islam is at least partially operational in the economic domain in many Muslim countries with the increasing role of Islamic finance and economics and the growth of Islamic institutions justifies the comparison. In any case, it is the duty of academicians to debate the theoretical issues and develop theoretical and operational models with a view to change society for the better. Social and critical accountings were once theoretical constructs of some the Islamic
academicians (see Matthews, 1997 for a review of social accounting over 25 years). If some academicians did not discuss the issues, these alternative ‘accountings’ would have not have developed as they have now. In any case the establishment of Islamic economic organisations attempting to practise Islamic values in the economic domain adds a practical reality to these notions. Bearing the above caveat in mind, the worldview and values of both civilisations are summarised in figure 2-2.
FIGURE 2-2: COMPARATIVE WORLD-VIEW AND VALUES OF ISLAM AND WESTERN CIVILISATION WESTERN WORLDVIEW AND VALUES MATERIAL WORLD VIEW Democracy Secularism Individualism Utilitarianism Welfare Liberalism And Freedom ISLAMIC WORLDVIEW AND VALUES DUAL WORLD VIEW Khilafah: ‘Shuracracy’ Consultative Government Tawhid,Unity Of State And Religion Amanah: Trust Individual In The Context Of Community Ikhtisab: Accountability;God’s Pleasure / Rida Public Benefit/Maslaha Responsibility & Restricted Freedom
The above values lead to an economic objective of maximising material riches as the economic objective of Western civilisation. The theoretical objective of Islam is the
attainment of falah (everlasting success) and rida (God’s pleasure) by acting within God’s law and adopting a moderate simple life style. The above values and objectives lead to certain moral/economic and legal norms and behaviour. This is shown in figure 2-3. In Islam, economic activity and wealth in Islam is viewed as a means to a balanced life and not its ultimate or even its main aim. The belief in the Hereafter imposes a ‘moral filter’ and consciousness and feeling of accountability in one’s actions in this world (Chapra, 1992; Jahangir, 1999). Therefore primacy of social welfare would be the main concern of the Islamic economic system as opposed to the primacy of profit in capitalist systems. The Shari’ah provides flexible but in depth guidelines for economic and social behaviour.
FIGURE 2-3: COMPARISON OF WESTERN (CAPITALIST) ECONOMIC NORMS VS. ISLAMIC ECONOMIC NORMS Western Economic norms (CAPITALISM) Primacy of profit/ wealth Usury restrictions /degregulated markets Sanctity of private property Disposal of property unrestricted Caveat emptor/ information efficiency Market values Competition Consumerism Welfare benefits Taxation Islamic Economic norms (ISLAMIC ECONOMIC SYSTEM) Primacy of justice and social welfare Prohibition of interest. Generally non intervention in markets Property as trust from God. Succession law fixes share and identity of beneficieries Information symmetry Market values Negotiation- cooperation Moral filter Zakat Restricted taxation
Its dictates impinge on the type of economic activity on what can and cannot be contracted. For example, interest is forbidden, this together with detailed succession rules for hereditary property reduces the concentration of wealth. Although Islam encourages market valuation and pricing, it must be ensured that is really a competitive market with information symmetry. However, the market is not God and is not the ultimate authority in determining the allocation of Muslim resources to the correct use. Here the state can and must intervene to provide a modicum of welfare and minimum needs to society (Siddiqi, 1996), even if it means less efficiency in the allocation of resources and redirecting it away from luxury production. Islam encourages a mix of private and public property and uses the family and voluntary sector (awqaf) to cater to welfare needs more as compared to the problematic welfare state (Siddiqi, 1996). However, the family and voluntary sectors are supported by the system of Zakat (a religious tax on property and income) which recognises the right of poor in the property of the rich and serves as a wealth redistribution mechanism. Social
welfare in Islam is a dual world concept. Hence the attainment of spiritual, social, familial welfare is as important if not more important than economic welfare. Taxation beyond Zakat is allowed but frowned upon by Islamic scholars although in Muslim history the despotic rulers did burden the populace with taxes. However, compared to the fiscal tyranny of the Roman (both pre and Post Christian) and Persian Empire, the Muslims territory represented tax havens! (See Thomson & Rahim, 1996). Finally, these economic/legal and moral norms of behaviour have implications for accounting. This is shown in figure 2-4.
FIGURE 2-4: ACCOUNTING IMPLICATIONS OF DIFFERENT ECONOMIC/VALUE SYSTEMS Issue Conventional accounting (capitalist economic system) Decision usefulness for investors and creditors; capital market orientation Market players and finance providers Monetarily measurable internal economic events Islamic accounting (islamic economic system) Islamic accountability Falah and maslaha Social welfare orientation Society Stakeholders Socio-economic events, include externalities, exclude shariah proscriptions, not necessarily financial Monetary and non monetary, balanced score card Current valuation Shariah compliance Socio-economic
Monetary , historic cost
All ‘material’ economic events
The values and economic norm of the different societies need different accounting systems in terms of their objectives, its users, recognition and measurement characteristics and type of information disclosed to be consistent with their worldview. Conventional accounting is capital market oriented towards the interests of capitalistic investors and interest-based creditors. Its users are market players (speculators) and interest-based debt providers who should not exist in an Islamic society. It recognises and records and discloses only monetarily measurable economic events using historical costs.
An Islamic accounting system, on the other hand, would produce information that would enable and motivate Muslims and other citizens of an Islamic society to behave in a manner consistent with the Shari’ah. It would allow the discharge of accountability towards God and society by identifying and measuring economic events whether externalities or otherwise as the users are various stakeholders in society. It should not construct a hyper reality or reality which pushes the Muslims to a pointless or frivolous life. Accounting systems within Islamic organisations should promote solidarity instead of conflict based on numbers as the present management and budgeting system does. The Shari’ate world view of Islam would require an accounting with different objectives (Islamically defined social welfare), different emphasis on events or transactions (halal and haram transactions), different measuring units (non-monetary, qualitative, weighted measures), different valuation and measurement (current value), different stakeholders (society, community, employees, government, ulemas, creditors, owners) and different disclosures (social, environmental, Shari’ah compliance), which arise from its own values. The cost concept, cash flow and shareholder value concept, the emphasis on profit and monetary measurement, even the accrual and going concern concept need a thorough review from an Islamic viewpoint and some of these concepts may well have to be rejected. Some of these issues are discussed in depth in chapters 3,5 and 6. In short Islamic accounting would enable the re-establishment, control and transparent administration of Islamic institutions such as Zakat Administration, Islamic Partnerships, Islamic companies, Islamic banks and takaful (insurance) establishments, Endowments (Waqf) and would lead to the achievement of the aim of these organisations in an Islamic society. As accounting is said to create reality by itself (Hines, 1988), the continued use of conventional accounting by Islamic institutions and Muslim users, however, may lead to behaviour inconsistent with the Islamic world view and subsequently over the long term a perversion of objectives might take place (See figure 2-5). This may pervert Islamic
organisations to become capitalistic organisations with materialistic values (indicated by the dashed curved arrow), which will in turn aim to achieve the objectives of the capitalist economic system.
In this chapter, the world-view and values of Islam were discussed and compared with the Western worldview and values. The researcher discussed the relationship of worldviews and values and their corresponding economic norms affect the objectives, characteristics and consequences of accounting. Since, different worldview and values give rise to different economic systems (e.g. capitalist, communist and Islamic), than alternative accounting systems consistent with these systems may be more appropriate. The materialist worldview and secularised values of liberty, democracy, utilitarianism have given rise to the capitalist economic system where individual self interest based on relativist values dictate the production and consumption of goods and services. It was shown that the worldview of Islam (which puts God in the picture) gives rise to a different set of values and economic principles which aim to promote individual welfare within a social and moral framework. These values are elaborated in the Shari’ah or Islamic law which provides both a moral and legal code under which a Muslim lives. The economic objectives of the Shari’ah indicated a concern with distributive equity and social justice rather than individual utility. This included circulation of wealth, prohibition of interest, the promotion of clarity, security, authenticity and equity in transactions together with implementation of Zakat and all these were considered the main economic objectives of the Shari’ah. In line with these
FIGURE 2-5: RESULT OF INCONGRUENCY BETWEEN ECONOMIC SYSTEM AND ACCOUNTING SYSTEM THE SOCIO-ECONOMIC OBJECTIVES OF THE Conclusion SECULAR CAPITALIST ECONOMIC SYSTEM
THE SOCIOECONOMIC OBJECTIVES OF THE SHARI’AH
CAPITALIST ECONOMIC INSTITUTIONS
THE ISLAMIC ECONOMIC SYSTEM
ESTABLISHMENT OF ISLAMIC SOCIOECONOMIC ENTERPRISES ORGANISATIONS AND INSTITUTIONS
USE OF CONVENTIONAL ACCOUNTING BASED ON ‘SECULAR PHILOSOPHICAL VALUES INCONSISTENT WITH ISLAMIC VALUES
ISLAMIC ACCOUNTING CONSISTENT WITH ISLAMIC VALUES
INCONSISTENT OR DEVIANT BEHAVIOUR OF MUSLIM USERS (HOMEO ECONOMICUS)
CONSISTENT BEHAVIOUR IN LINE WITH ISLAMIC NORMS
objectives, the rules regarding manpower transactions, Islamic consumer behaviour and forbidden transactions and contracts were discussed to clarify the
economic/moral norm underlying an Islamic economic system. Finally a comparison was undertaken between the worldview of Islam and the West along with the implications of the differences in values, economic norms and accounting. The researcher concluded the chapter by suggesting that an alternative Islamic accounting is necessary to achieve the objectives of the Islamic economic system as continued use of conventional accounting by Islamic organisations and users may lead to a perversion of the Islamic economic and value systems. The next chapter (chapter 3) will explore in depth the objectives, characteristics and consequences of conventional accounting which make them unsuitable for Islamic organisations and Muslim users. The critique of conventional accounting from a social, environmental, critical and behavioural perspective will be discussed with the addition of a critique from an Islamic perspective. This, the researcher hopes, will convince the reader of the unsuitability of conventional accounting for Muslim organisations and users and the need for Islamic accounting.
CHAPTER 2: WORLD-VIEWS, VALUES AND ACCOUNTING; DIFFERENT “ACCOUNTINGS” FOR DIFFERENT WORLDVIEWS. .............................................................. 19 2.0 OUTLINE OF CHAPTER .................................................................................................................... 19 2.1 WORLDVIEWS,VALUES AND THEIR IMPACT ON ECONOMIC OBJECTIVES,NORMS AND ACCOUNTING ............................................................................................................................................................ 19 2.1.1 The Western Worldview and values................................................................................ 21 2.1.2 Western Worldview ......................................................................................................... 21 2.1.3 Democracy and Popular Sovereignty ............................................................................. 22 2.1.4 Individualism, liberalism and utilitarianism .................................................................. 23 2.1.5 Empiricism ...................................................................................................................... 26 2.1.6 Secularism ...................................................................................................................... 27 2.2 CAPITALISM, ECONOMIC NORMS AND ACCOUNTING ....................................................................... 28 2.3 MARXISM: A REACTION AGAINST CAPITALISM. .............................................................................. 33 2.4 THE ACCOUNTING IMPLICATIONS OF WESTERN WORLDVIEWS, VALUES AND ECONOMIC NORMS..... 34 2.5 THE ISLAMIC WORLDVIEW AND VALUES ...................................................................................... 39 2.6 THE IMPLICATION OF ISLAMIC WORLDVIEW AND VALUES FOR ECONOMIC NORMS AND CODES: THE SHARI’AH AND ECONOMIC OBJECTIVES ................................................................................................ 45 2.6.1 Circulation of Wealth ..................................................................................................... 47 2.6.2 Security ........................................................................................................................... 49 2.6.3 Authenticity ..................................................................................................................... 49 2.6.4 Equity: ............................................................................................................................ 50 2.6.5 Dignity of Labour ........................................................................................................... 51 2.6.6 Morally Filtered consumption: ....................................................................................... 51 2.6.7 Prohibition of immoral and unsocial contracts ............................................................. 54 2.7 ACCOUNTING IMPLICATIONS OF ISLAMIC ECONOMIC VALUES AND NORMS .................................... 54 2.8 A COMPARATIVE ANALYSIS OF WESTERN AND ISLAMIC VALUES AND THEIR IMPLICATIONS FOR SOCIOECONOMIC NORMS AND ACCOUNTING ............................................................................. 55 2.9 WORLDVIEW AND VALUES: A COMPARISON ................................................................................... 57 2.10 CONCLUSION ............................................................................................................................... 63