Modelling the Economic Growth of an Islamic Economy

Abstract

In an Islamic economy economic growth is not an end in itself, but
rather a means of promoting the citizenry's good life. Growth depends
upon several factors, among them a consistent increase in the amount of
physical goods and seMces produced over a given period of time. This
is usually taken as an index of economic growth. Adopting the same
index, this paper asks: What factor explains economic growth in an Islamic
economy? For this purpose, the paper refers to the Islamic economy
of Madinah, which saw substantial expansion in all directions during the
reigns of the Prophet and his four immediate political successols.
This paper gives an answer based on the hypothesis that both physical
and moral factors are instrumental in causing economic growth in an Islamic
economy. This hypothesis is quite different from that of secular
economics, which views economic growth only in terms of physical factors.
Such an explanation has been found inadequate, however, as empirical
studies on American data have shown that just over half of all output
growth is explained by physical factors. Denison calls the unexplained
part "the measm of our ignorance" (Branson and Litvack 1981).
Many Muslim economists have discussed the role of moral factors in
various forms (i.e., integrity, cultural will, and calls to the Muslim masses
to regain their past glory). This paper, however, views the role of moral
factors in terms of the bounty of God (fadl Allah). It is argued that this
factor influenced economic growth through both autonomous and induced
channels operating in institutional factors (i.e., the mosque and the state)
and the level of God-consciousness (taqwa) in an Islamic society.
The hypothesis is examined theoretically, because statistical data for
empirical analysis is not available. The paper relies on the Qur'an and the ...