The Islamic Theory of Distribution

The first form of economic wealth is the natural resources of the environment.
Unjust distributtion of economic wealth begins with the problem of ownership of
these natural resources. One must know who has the right of ownership of these
resources in Islam. Sadr, thus, must develop the theory of distribution of
natural resources at two stages: preproduction and postproduction stages, or
what he calls primary wealth and secondary wealth, respectively. His
endeavour is to dis­cover the doctrinal basis of Islamic teaching concerning
economic ownership. For him, the study of economics in its empirical sense at
this stage is irrelevant to the issue of social justice. In other words, he is
building an ideological theory which addresses this issue. The empiri­cal study
of economics comes much later to evaluate whether the application of the
ideological theory in the realm of life has an ade­quate basis in reality.

The first step to end the contradictions in the economic structure of society
begins with the distribution of economic resources among people. A just social
system is one that allows all people to benefit from economic wealth. The
Islamic economic system, accordingly, is based upon this criterion.

The first form of economic wealth is the natural resources of the environment.
Unjust distributtion of economic wealth begins with the problem of ownership of
these natural resources. One must know who has the right of ownership of these
resources in Islam. Sadr, thus, must develop the theory of distribution of
natural resources at two stages: preproduction and postproduction stages, or
what he calls primary wealth and secondary wealth, respectively. [6] His
endeavour is to dis­cover the doctrinal basis of Islamic teaching concerning
economic ownership. For him, the study of economics in its empirical sense at
this stage is irrelevant to the issue of social justice. In other words, he is
building an ideological theory which addresses this issue. The empiri­cal study
of economics comes much later to evaluate whether the application of the
ideological theory in the realm of life has an ade­quate basis in reality.

Distribution of Natural Wealth

In constructing the conceptual framework of his theory, Sadr also disagrees
with political economists on the scope of economic resources. He disregards
capital and labour as parts of economic resources. It is only nature that can be
taken into account in the theory of distribution of natural resources. "For
capital is, in fact, a produced wealth and not a primary source of production,
because it represents, economically [speaking], any wealth which is produced and
generated through human labour that can be reinvested in the development of new
wealth. [7]

On the other hand, nature itself is classified into four categories: 1) land; 2)
raw material; 3) water; and 4) other natural resources such as living species in
the air, sea and on land. [8] Although the laws of Islam seemingly contain
different regulations for each one of these categories, Sadr used his ingenuity
to discover the common ground between them, giving his interpretation of what he
calls "The General Economic Theory of Islam."

The sole owner of land and raw materials is the Islamic State. People may gain
special rights of ownership if they invest their labour to develop these natural
resources, such as cultivating land and mining minerals. Individuals may gain
precedence over others for a piece of land or source of minerals which they
work. The special right of owner­ship may be gained only through labour invested
in developing that land or raw material, and such right expires as soon as that
development ends. [9] People utilizing these resources must pay property taxes
for their use to the Islamic State.

Water, on the other hand, can be owned if it is possessed for economic
development. Although the sole proprietor of the natural resource of water is
the State, all people have access to it for their use. The only exception is
underground water, where the individual who invests his labour to develop its
utility has an exclusive right to its use and benefits. [10]

Other natural resources, such as birds, animals, plants and marine life, are
publicly owned. These sources of economic wealth may be­come private property
through individual effort. [11] As such, people, not the State, have the
exclusive right to own resources via their labour. They may not lose this right
indefinitely, or pay property taxes for their possession.

Based on this view, Sadr concludes that people themselves or, in more concrete
terms, their representative government, are the sole and legitimate owner of the
natural resources. Individuals may gain special privileges to make use of these
resources only through their invested labour to develop these resources. Other
types of individual labour, such as the use of force to possess, are not
considered legitimate means to ownership. Specifically, it is only invested
human work that has legal significance for ownership of natural resources.
Generally speak­ing, Islam gives individuals the right to own private property
only through their continuous effort to develop these resources to benefit
society as a whole. Once private development of these natural resources is
suspended, the right of private ownership would cease too. [12] From this Sadr
derives the first principle of his theory:

All natural wealth is part of the public sector and individuals gain the special
rights to use them only on one ground, that is, labour characterized by
development [of these resources] by the direct work [of the individual himself].
[13]

According to the above principle, an individual may not use other individuals to
develop a natural resource in order to have the right of ownership of a large
estate, for example; otherwise they will share the ownership and the benefits of
that natural wealth on the basis of their labour. Islam totally rejects the
capitalitic principle of individual ownership of vast natural resources on the
ground that they are devel­oped by the labour of others. For the same reason,
industries for the development of such natural resources as oil and minerals can
be owned and managed only by the State. Notwithstanding the emphasis on public
ownership of natural resources, Sadr introduces the concept of the "priority
right of use" of natural economic resources by the indi­vidual. He states that
those who possess the labour and will to exploit the resources have the right to
gain access to them if such exploitation serves public interest.

Distribution of Produced Wealth

Sadr, furthermore, develops an Islamic theory of distribution of produced
commodities. Produced wealth is classified into: (1) primary commodities, such
as agricultural produce and raw materials; and (2) secondary commodities, which
are the primary commodities manufactured into different products. In both of
these stages of pro­duction, capital generated from previous economic endeavour
as well as the means of production (tools and machineries) take part in the
production process in these advanced economic activities. However, contrary to
the capitalist theory, each of these components has no share of the product but
they gain special rights for their use and their wear‑and‑tear in the production
process.

As mentioned under the previous principle, Islam gives the worker the sole right
of ownership of produced goods. However, Sadr realizes that human labour is but
one of the components in the production of primary commodities. The other
components are the natural environ­ment and the tools which help man in the
process of production. The tools, or means of production, according to Sadr,
"contain stored up work of previous stages of production that will be exhausted
and depleted during their use in the process of production." [14] In this case,
if the tools are not property of the worker who benefits from their use during
the process of production, then the legitimate owner of these tools must get
paid for the use of his tools, i.e., the depleted stored up work in the tools.
[15] According to Sadr, herein lies one of the major ‘ideological differences
between capitalism and Islam. The former regards the owner of the means of
production as the sole owner of the produced commodities, whereas Islam
considers only the labourer to have the legitimate claim to the commodities
produced. In capitalism, tools get a share of the product because their use,
like human labour, represents expenditure of a certain amount of work in the
production process. In Islam, tools only assist and aid man to facilitate the
process of production; thus, they must be compensated for in rent, not in profit
sharing. [16]

Accordingly, only the labourer has the legitimate claim to the products of his
effort. Therefore, it is unthinkable in Islamic economics, states Sadr, for
someone to employ others and provide them with rent and tools so that he alone
owns the products of their labour. [17] Likewise, industries and production
units that employ many workers can function in an Islamic State only if they are
owned publically. In Sadr’s theoretical vision industrial capitalist production
can no way evolve in an Islamic economic system except through State’s direct
involvement and control in economic development. The State, on behalf of
society, which is the sole owner of economic resources, can employ people and
pay them only wages for their work and not give them share of the produced
commodities.

Furthermore, since the utilization of the economic wealth of the environment is
the responsibility of society as a whole‑the sole proprietor and beneficiary of
natural resources‑it gets a share of the produce of primary commodities. The
State, in this stage of produc­tion, has the right to collect what is known as
tasq (income tax) from producers to finance social welfare expenditures and meet
the eco­nomic needs of the people. [18]

As for the production of secondary commodities, Islam gives the owner of primary
commodities the right to establish his claim to final products. The legitimacy
of his ownership does not cease because someone aids him in transforming his
commodity into different forms. An individual, if he/she owns the raw materials,
has the right to manu­factured commodities produced out of that material. To put
it plainly, the worker, in this case, does not only own the product of the
natural resources but also the produced commodities in latter stages of
pro­duction. If the State, for example, extracts or mines certain natural
resources through its publically owned enterprises, then it also has the right
of ownership of all the finished goods extracted from those natural resources.
People who participate in the production would get paid for their labour.
Industries that develop natural resources, such as oil and minerals,
theoretically speaking, cannot be owned privately in an Islamic economic system.
It is because the State is the primary owner of natural resources, which gives
it the right to own the pro­duced product. However, there is a theoretical
loophole to make capitalists flourish in an Islamic economic system, which is
through the obtaining of natural resources from the State on lease by private
enterprises, where the latter can claim legitimate ownership of the produced
commodities.

In any case, ownership is not affected by the use of the means of production
belonging to someone else. The owners of tools and ma­chines get paid for the
use of these in the production process. By the same token, the owner of primary
commodities may also hire someone else to manufacture his goods. The worker,
this case, gets the salary for his labour, which should be specified in the job
contract. The worker, consequently, has no claim on the final product he
produces. [19]

Islam specifies two means of payment for a hired worker: the first one is
through wages, where he is paid for the amount of work he performs in
accomplishing a task; the second is by sharing in the profit of the final
product. In this case, the worker gets only a per­centage of the profit
specified in the agreement between him and the owner of the primary commodities.
The general principle, in Islam, for earning is:

…that earning is only based on contribution of labour during the process (of
production), so the contributed labour is the only legitimate means for some­
one to get paid by the owner of the process…and without such contribution,
there is no legitimacy for his earning. [20]

Based on this economic principle, the owner of capital will not receive fixed
payment from the owner of primary goods, i.e., it is usury, which is prohibited.
Monetary capital will not be considered as contributing any amount of labour at
all. [21] Fixed payment is allowed in Islam only in one case, where there is a
consumption of labour, either directly through a worker, or indirectly
(accumulated work) through the means of production. As for monetary capital, no
such work is exhausted or depleted. In this matter, the owner of the capital is
allowed to share the profit and the loss with the owner of primary commodities.
The legitimacy of earning in this situation is based on his help in facilitating
the process of production, for which he deserves to be rewarded in the form of
profit sharing.

Notes:

[6]. Al‑Sadr, "al‑Nazariyyah al‑’Islamiyyah li‑tawzi’ al‑masadir al‑tabi’iyyah"
(Islamic Theory of Distribution of Natural Resources) in Ikhtarnalak (Beirut:
Dar al‑Zahra’, 1982), 136‑137.

[7]. "Al‑Nazariyyah," 138.

[8]. Iqtisaduna, 433.

[9]. Ibid., 483.

[10]. Iqtisaduna, 519‑520.

[11]. Ibid., 5 2.

[12]. "Al‑Nazariyyah al‑’Islamiyyah li tawzi’," 148.

[13]. Al‑Sadr, Khutat tafsiliyyah `an iqtisad al‑mujtama` al‑’Islami (General
Basis of Economics of Islamic Society), in al‑Islam yaqud al‑hayat, 88.

[14]. Iqtisaduna, 619.

[15]. Iqtisaduna, 584.

[16]. Al‑Khutat al‑tafsiliyyah, 97.

[17]. Ibid., 99.

[18]. Al‑Khutat, 561.

[19]. Iqtisaduna, 605.

[20]. Iqtisaduna, 618.

[21]. Ibid., 625‑627.

An Islamic Perspective of Political Economy: The Views of (late) Muhammad Baqir al-Sadr

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