Department of Economics, University of Muhammadiyah Yogyakarta (UMY), Indonesia
Center for Islamic Studies in Finance, Economics and Development (CISFED), Jakarta, Indonesia
The existing concept of development emphasizing more on mundane aspect of human life as compared to spiritual one has reached an unprecedented technological achievements; and led many countries in the world to experience significant industrial and thus economic growth. This growth is largely contributed by capital accumulation being the main production factor created through the means of financial bubble as developed in banking system, and capital and derivative markets. Nevertheless, the underlying materialistic philosophy in pursuit of self–interest with acquisitive behavior of the economic agents leads to global financial crisis. Rethinking development concept in a comprehensive manner necessitates unity of dual dimension of human life, mundane and spiritual. This paper attempts to provide a comprehensive overview of Islamic perspective on human development, beginning with the worldview on the creation of human being and their responsibility in the universe, followed by the root of the financial crisis in the world and its solution.
Keywords: human resources, human capital, human development, economic development
The era of globalization beginning from the second half of the twentieth century is largely characterized by tremendous changes in physical appearance of human achievements, and these changes evidently remain to continue. This is in particular shown by breakthroughs in science and technology, which constitute a backbone of the modern civilization. Rapid progress of technology gives rise to vast industrialization that chiefly contributes to economic growth of a country, through improving the total factor productivity. In economic viewpoint, the technological progress and industrial advancement constitute two blades of scissors representing the primary measure of the success of development, which was exclusively defined as economic development. While the scissors is used physically to cut thin and soft materials into different parts, the technological progress and industrial advancement have likewise sociologically cut human life into two dichotomous parts, pseudo-economic success and social disequilibrium, as a concomitant fact. Analogous to the scissors, development has cut into separate generations the continuity of human achievements and created intergenerational gaps. This is because of high concentration of the effort in achieving the successful short-term economic growth, at the cost of the future generations, such as macroeconomic imbalances, moral decadence, family breakdown, growing inequality, environmental destruction.
This dangerous process of humanity had warned economists and policy makers. Therefore, they have taken immediate measures by introducing the concept of sustainable development. However, the new concept may not satisfactorily answer the development enigma, stemming from the failure to address the root of the problem, emptiness of value. The value, at which the underpinning philosophy of life continuously inspires human being, optimizes and equilibrates every aspect of his achievements. The emptiness of value is of the religious domain for which the need to implement in human life remains debated by most western-trained scholars, in particular, economicsts; whereas in Islam, every single aspect of human must be integrated into the religious values. This paper provides an effort to elaborate some issues in human resource development and provide answers to them from Islamic perspective. Human resource development in this analysis is not restrcited to a microlevel unit of a company, but a wider concept involving macroeconomic pesrpective, covering all human factors of production such as human capital as defined in economics in general, and labor. We begin with some basic philosophy of human life, brief notions of epistemology and methodology of development economics and thus economic development, economic reality in the modern world including the problems resulted in the economy such as global financial crises. The paper ends up the discussion with Islamic notions for the solution recommended for improvement.
Worldview and the Creation of Reality of Human Life
Worldview plays a pivotal role in determining the direction of any system of science and thus of social system. Worldview is an evolutionary concept originated in the West, which gradually evolves along with the development of a society in response to realities of the world, encompassing the existence of God and of His creatures, i.e. nature and man (Hasan,1999). In an Islamic perspective, this term is utilized to have a slightly different meaning, in accordance with its teaching, adhering the position that God (Allah) is Supreme, above all things and creatures, and there is nothing like unto Him (al-Ikhlas: 4). He is the Reality Itself from Whom knowledge (ilm) emanates to man (al’Alaq: 2-5). To acquire the knowledge, man is equipped with free-will (iradah), intellect or reason (‘aql) operating within the boundary of the Greatness of His Will and Sovereignty (al-Insan: 19-21). Therefore, man can open his ‘aql and qalb simultaneously to observe the realities of God, man himself and the universe under the guidance of the Divine Revelation, which is gradually instilled into human mind and heart. The gradual process of revelation makes the formation of the Islamic worldview attains to its maturity. In this sense the worldview in principle remains unchanged as it is firmly anchored to the Islamic Shari’ah, though human perception to it may change, subject to time and space constraints. The main point which makes Islam diverges from secular worldview is the treatment of God. Such a divergence, however, leads to differences in the whole structure of the two. Secular worldview, in Chapra’s (1416/1995) words, reduces significantly the position of God to be a “clock-maker of Newtonian world machine.”
This worldview has been dominating the world for about three centuries as a result of a long-period process of the Aufklarung, as a serial accumulation of intellectual exercises of the great Western thinkers. Bacon, for instance, laid down the foundation of research method using inductive approach. Pheby (1988) viewed that this approach had been used by Bacon as weapon to scold the debate, in response to the authorities of the Church and Aristotelian deductive logic. Descartes vindicated the approach through building the knowledge on the foundation of radical doubt, though his doubt did not necessarily imply an extreme opposition to revealed religion. When Newton came, he invigorated the body of knowledge by developing reductionism, an explanatory system about the motion of a particle in a space with its natural laws governing the gravity (Galbraith and Darity, 1994).
Furthermore, the subsequent thinkers became more radical in opposition to religion or even more hostile (Chapra, 1416/1995) until the era the economics and other social sciences came. Locke, Smith, among others, then applied the principles of natural sciences into those of social. In 1895, such a worldview achieved the victory via the publication of Darwin’s On the Origin of Species, reinforcing the development of knowledge with his theory of evolution. It is natural that every organism involves in ‘the struggle for its existence’ against any other organism without compassion and pity, in order for, what Spencer termed, ‘the survival of the fittest.’ Application of Darwin’s theory to social sciences, consequently, makes the mechanistic assumptions of natural order completely suitable for human being (social order). As a further consequence, dependence of the social sciences including economics and development on those of natural has invariably reached its peak.
The Role of Epistemology
In the journey of the unverse, there is a gigantic invisible power, instituted by three elements stemming from worldview that shapes an epistemology and altogether in combination creates the reality. An interactive influence of these three elements to each other has been working simultaneously to generate further interdependence among them; and permeates over the framework of sciences, technology, way of life and interpreting the religion into activities. Muqorobin (1995) advocates further development of this systemic interaction to create new realities, placing epistemology as the center of two others as depicted in Figure 1. Alattas (1989) has also argued that epistemology, if treated to have a nearly equal meaning to philosophy of science, as Matchlup (1978) considers, simultaneously becomes the interpreter of sciences and organizes their results into a worldview.
|Domain of the worldview and reality|
The Relation of Epistemology, Wroldview and Reality
The Rise of Positivism and Its Influence on the Modern Reality
Following epistemology, development of sciences consequently requires the presence of their methodology, of which earlier development in particular that of social sciences, especiually economics had sparked off controversy of is and ought, or positive versus normative economics. J.N. Keynes attempted to reconcile such a controversy. However, his conclusion is nothing but to prove right the former, the abstract-deductive view of the old (English) school (Blaug, 1980). In 1932, the optimism of methodological convergence of positive and normative sciences was also challenged by Robbins in his Nature and Significance of Economics Science, reestablishing the “entire” domination of the “orthodox” or “received” view (Hausman, 1988). He argued, economics is neutral with respect to the objective of economic policy. Nonetheless, within these differences, Blaug (1980) categorized the earlier methodologists’ vision under one group, verificationists, as opposed to the twentieth-century falsificationists, belong to which he classified himself. Among the categorical differences: the former starts with observations while the latter with problems; the former is to prove the “truth” of a statement whereas the latter is to demonstrate its “falsity”.
On the other hand, to challenge the verifiability of knowledge, Machlup (1988) put forward another polemical issue by grouping the methodologists and economists into two, “a priorists” and “ultra-empiricist.” In the first group they were von Mises, Knight, Weber and some earlier methodologists like Mill, Senior and Cairnes; while Hutchison is an example of the second par excellence.
Irrespective of this controversy, agreement appeared in methodological discussion between Caldwell (1982), Hausman (1988), and Redman (1991), that the significant impact influencing the establishment of economic methodology started in the beginning of logical positivists movement, attributed, to a greater extent, to the “Vienna Circle.” The Circle, composed of academicians from various disciplines, was established in the middle of 1920s, led by a physicist, Moritz Schilck. Regular discussion for about eleven years gave birth of logical positivism (Caldwell, 1982), with its most influential view: … that knowledge is grounded in experience and that meaningful statements are verifiable by observation and experiment (Redman (1991). Verifiability remained in the use as a criterion primarily to exclude metaphysical statements, though a member of the Circle, Rudolph Carnap, proposed the use of confirmability to avoid confusion from August Comte’s positivism. Confirmability also indicates the possible derivation of true propositions from the statements. They aimed at formalizing all problems in logic, and all-encompassing science should be joined by one method: logical method of analysis. In 1929, they published an eloquent treatise, the Scientific World-View, in which the unity of science concept as their ultimate outcome was affirmed.
To invigorate the concept, the Circle had also established a serial publication, named Erkenntnis (1930-1939), and set up the Institute for the Unity of Science in 1936 in The Hague. The institute had obtained wide recognition, and renamed its publication to the Journal of Unified Science. Even though positivism has initially come about with intellectual discourses, its tendency towards elimination of ideological and metaphysical elements of science made its movement confronted with political difficulties. Consequently, during the World War II, under Nazi occupation, the Circle’s members faced assassination after an insane student murdered Schilck. This led to “diasporas” of logical positivists. However, thanked the situation, the movement had obtained worldwide recognition. Afterwards, the positivist movement took more moderate but matured and developed into the most sophisticated form in 1950s under the so-called logical empiricism. In economics, as Redman (1991) notified, the influence of logical positivism/empiricism enables the subject has evolved gradually from “political economy” to “economics” and then into its current form, “positive economics.” She mentioned the economists Mark Blaug and Bruce Caldwell, and the philosopher Daniel Hausman to explicate the remarkable union of these two enterprises. After getting the ideas of logical positivism/empiricism into economics by Hutchison, an attempt to show that the subject satisfies the positive methodological standard (using a priori basis) is also pronounced by Friedman in his Methodology of Positive Economics (Hausman, 1988).
Positivism: Basis of the Current Human Development Concepts
Methodologically, current development of economic sciences, including development economics is not independent from posotivism. Statistics and econometrics are among the tools of empowering positivism. This necessitate a supporting belief in the existence of material subtances, as consequence of the philosophy of materialism. However, an extreme emphasis on material belief leads to negligence of other dimension of human life, which is equipped with spiritual. The needs for the interfere of God in human life is inevitable fact in modern development concept, though revision is of concerns to the invigorated concept of sustainable development.
The concept of development was introduced by the US in 1947 (Pramanik, 1997), after the World War II to protect dissemination of the socialist influence in developing countries, encompassing economic, military and technical aids to those economies.
This also signified a remarkable historical backward, when a holistic envision of human development in the so-called developing countries, where the greater part of Muslims live, was reduced to the level of cash-based economic progress. The progress is principally measured by either gross national product (GNP) or gross domestic product (GDP), by which every developing economy competes to attain a certain level of its growth. Following years of implementation of the concept, most developing economies have experienced substantial increase in the economic growth and income per capita, so as to catch up with their counterparts in developed countries.
Following years of implementation of the existing concept, most developing economies have experienced substantial increase in the economic growth and income per capita, so as to catch up with their counterparts in developed countries. Table 1 shows the real GDP growth of the world, from 1972 to 2005. It is seen that Indonesia and developing countries in general have experienced a relatively greater percentage of change in the annual growth than the developed economies have done.
GDP Growth of the World, 1972-2005
|Year||World||Industrial Countries||Developing Countries|
|Source: Human Development Index, various issues|
The models of both economic development and growth, suggest self-evidence of the positivists’ influence in economics sciences. Among the examples of the models are shown in the convergence theory of growth, as pioneered by Solow (1956) and further augmented by many others such as the MRW model, named after Mankiw, Romer, and Weil (1992); Crihfield, Giertz and Mehta (1995) or denoted by CGM; and reexamined by Pugno (1996), and Temple (1998), with differences in the findings and conclusions. Furthermore, the convergence theory of growth illustrates competition of countries in the world in capital accumulation as a response of the developing countries to their counterparts of the developed economies. The very substantial achievement as shown by the theory is that every single aspect of human life is submitted in effort to the capital accumulation through the means of enhancing technology and human resource development. Consequently, human resource development is also aimed at attaining the objectives of catching up a certain level of economic growth, which is articulated in capital accumulation of the countries.
Current development of economic theory, especially neoclassical economics, reduces human being into “physical means of production” as propounded by Jacob Mincer and then invigorated by Gary Becker, through the means of education, training and medical treatment (wikipedia: July 2009). Human capital refers to “the stock of skills and knowledge embodied in the ability to perform labor so as to produce economic value. It is the skills and knowledge gained by a worker through education and experience.” The models are rewritten here to explicate their emphasis on material aspects of human life, which is termed ‘capital’.
A typical growth model of Cobb-Douglas production function (Y) is often used in terms of capital (K) and labor (L), which are paid their marginal products:
Y = F (K, L, t ) = A(t) Ka Lb (1)
Where a and b are the share of income distributed respectively to capital and labor. One of C-D production function properties is a unique feature of homogeneity of degree 1, so that (a + b = 1), or b = (1 – a ). A(t) is said to be time-related shift factor that then is conceivable as total factor productivity (TFP) or technological change. It measures disembodied technical change expressed in an exponential function of time, of which the rate being reflected by the shift parameter, λ, so that A(t) = eλt.
Equation (1) exhibits Hicks-neutral disembodied technical change, where technical change is equally capital- and labor-augmenting (Link, 1992). The augmented Solow model, by replacing b with (1 – a ) can be expressed as:
Y(t) = K(t)a (A(t)L(t))1-a 0<a < 1 (2)
The assumption of first degree homogeneity as the main property of C-D production function is taken less stiff in the MRW model, implying that (a + b < 1), or decreasing returns to scale to all capital. It is hence assumed that A exogenously grows at the rate g, does so L at the rate n, and the number of effective units of labor, A(t)L(t), grows at the rate n + g, so:
A(t) = A(0) egt (3)
L(t) = L(0) ent (4)
There is a fraction of output, s, to be saved and then invested. Defining k and y as stock of capital per effective unit of labor and output per effective unit of labor respectively, so that k = K/AL and y = Y/AL, and incorporating the rate of depreciation as δ, yields the growth of k, defined by:
k(t) = sy(t) – (n + g + δ) k(t)
= sk(t)a – (n + g + δ) k(t) (5)
In a steady state value, equation (5) is set to be zero, so that:
sk*a = (n+g+δ)k*
k*1-a = s/(n+g+δ)
k* = [s/(n + g + δ)]1/(1-a) (6)
Equation (6) explains that the steady state capital labor ratio is positively related to the rate of saving, and negatively to the rate of population growth. Since k = K/AL, so that k* = K(t) /A(0) L(t)
K(t) = A(0) L(t) k*
K(t) = A(0) L(t) [s/(n + g + δ)]1/(1-a) (7)
Substituting equations (7) into (2), and taking the natural logarithm we get equation:
Ln[Y(t)/L(t)] = lnA0 + gt + a /(1 – a ) ln(s) – a /(1 – a ) ln(n + g + δ) (8)
Human Capital Consideration: The MRW and CGM Models
In developing their model, Mankiw, Romer and Weil (1992) consider human capital, measured by education collected from the UNESCO yearbook, and thus, equation (2) can be modified to obtain:
Y(t) = K(t)a H(t)β (A(t)L(t))1-a –β 0<(a+β)<1 (9)
An assumption remains unchanged that a + β < 1, implying decreasing returns to scale (to all capital). This is required to ensure the presence of steady state in this model. In this context, the fraction of saving is also divided into two, to be invested in physical as well human capital. Hence, similar procedure can also be derived to obtain the specified model. So, similar notations as in the above are consequently used here, including human capital per effective unit of labor, denoted by h = H/AL, assumed to behave similarly with the physical capital in the production function.
In the steady state values, there are two ways of expressing the model that incorporate human capital, depending upon the available data. First, determine the rate of human capital accumulation; and second, determine the level of human capital. Finally, the same procedure as in the original Solow model results the key equation of the MRW model:
ln[Y(t)/L(t)] = lnA(0) +gt +a /(1–a –β)ln(sk) +β/(1–a –β)ln(sh)
– (a+β)/(1–a –β) ln(n+g+δ) (10)
Likewise, using such a procedure, the second expression is obtained as:
ln[Y(t)/L(t)] = lnA(0) +gt +a /(1–a)ln(sk) +β/(1–a)ln(h*)
– a /(1–a)ln(n+g+δ) (11)
Using the first approximation (the rate of accumulation of human capital), MRW examined the data on the fraction of the population, beginning from aged 12-17, for the secondary school. This enrollment rate was thus multiplied by the fraction of working aged population (aged 15-19). Ignoring the difficulty, which was also confessed by the authors, of its exclusion of teachers, primary school children, and the higher level students, the MRW model can relatively successfully enforces the prediction of the Solow model. It predicts in principle that all the coefficients on ln(sk) and ln(sh), represented by ln(I/GDP) and ln(SCHOOL) respectively, and on ln(n+g+δ), sum to zero.
On the other hand, Crihfield, Giertz and Mehta (1995), instead of using cross-country data for examining the convergence of the Solow model as done by MRW, develops a similar way using cross-region data of the U.S, consisting of 50 American states. They extend the analysis with the augmented public capital, which has also a share in saving/investment. They also assume some sort of endogenous factors – i.e. rates of population and labor growth, saving and investment – which can move freely within a single country like the U.S. so as to formalize the model similar as:
Y(t) = A(t) K(t)a H(t)β Z(t)γ L(t)1-a –β–γ a+β+γ<1 (12)
Therefore, while in the previous notations MRW model uses AL as denominator, CGM model occupies only L, per capita for all numerators. Thus, with k = K/L and y = Y/L, z = public capital per capita can be defined as z = Z/L. Since these factors are endogenously determined, the CGM model thus characterizes, too, homogeneous of degree 1, implying that:
Y(t) = A(t)L(t) k(t)a h(t)β z(t)γ (13)
Using the same prior procedure we get:
and taking the logarithm to eventually yield per capita income at the steady state level:
ln[Y*(t)/L(t)] = lnA(0) +gt/(1–a –β–γ) +a/(1–a –β–γ) ln(sk)
+β/(1–a –β–γ) ln(sh) +γ /(1–a –β–γ) ln(sz)
– (a+β+γ)/(1–a –β–γ) ln(n+δ) (14)
Hence, equation (14) is differed substantially from the MRW equations of either (10) or (11) in technological change (or TFP) as appears in the second term of the right hand of all these three equations, which are interdependent from other factors here (within one country). However, this endogenous factor assuming constant returns to scale should not lead to dismissal of the Solow model, the one that MRW cast doubt through their findings. Despite little difference in this analysis, the CGM model remains supported that of MRW in predicting the convergence of cross-country (-region) growth. Further analyses regarding with the debate between the MRW and CGM models, and the speed of convergence are beyond our discussion here.
The difficulty of economic theories, in particular application of these models of growth into the empirical facts, is their reliance on material goals. Consequently, human capital models, supported by technology become a driving force for the economies of the world to pursue their material breakthroughs. Adam Smith’s notion of self-interest obtains its significance in macroeconomic levels. Every single country is in harsh competition to each other, by putting aside moral values for the sake of satisfying their acquisitive behavior for the material pursuit.
This macroeconomic condition is not independent from its microfoundation on the acquisitive behavior of every economic agent. Through the long period of history, capitalists’ behavior tends to bubble their accumulated capital by creating banking system, which operates on the interest basis, to absorb external funds. In the morally-unhealthy competition, the ubiqitous influence of the Darwinian notion, survival for the fittest, signifies the acquisitive behavior. The financial bubble further widens its scope by creation of secondary and derivative markets, following capital markets, of which their transactions is not for investmet purposes, but maysir– and gharar-base (or speculative) capital gains, as exhibited in Figure 2. This leads to creation of sectoral imbalances that highly empowering monetory sector so that it becomes very huge and (seemingly) powerfull, in contrast to the real sector which is left far behind.
|Market for goods & services|
|Market for labors, lands, etc.|
|Market for capital & loanbale funds|
Typical Markets in the Current Economic System
Ultimately, an uncontrollable explosion of the 2008-2009 financial bubble commencing with a loss of confidence by investors in 2007 from the US financial markets, especially those related to securitized (subprime) mortgage, spreads not only in developed countries but all over the world. This crisis occurs at the end of a serial major financial crises in the world affecting considerable meltdown in many countries. Khan (2008), among others enumerates nine major crises in financial and banking system since 1980, as illustrated in Figure 3.
|Source: Iqbal Khan, 2008|
Nine Major Financial Crises of the World
Prohibition of Maysir and Gharar
Islam prohibits maysir and gharar, two terms that have almost the same meaning. Maysir means gambling. Any business involving gambling is prohibited. Gambling is also very close to risk, a gambler is a risk averter, but not all kinds of risk aversion are gambling. Aversion of risk in terms of planned trade is not such a gambling. The root of the word maysir means the easy and huge money. It refers to accumulation of wealth by playing and winning games of chance rather than getting involved in a real economic activity to get earning. This is what the evidence found in the future and derivative markets, which is not allowed by the Shari’ah. Prohibition of maysir is found in the verse of al-Baqarah 219. They ask thee concerning wine and gambling. Say: “In them is great sin and some profit for men; but the sin is greater than the profit.”
Another transaction or contractual element prohibited in Islam is gharar or uncertainty, defined as not knowing whether something will take place or not in the future. Al-Dhareer (1997), who elaborates gharar in depth in an IRTI- IDB eminent scholar’s lecture series no 16, suggests a number of transactions involving gharar including future contract or sales. He further elaborates that the sale of something is shifted from the present to a future date, with an example: “I sell you this house of mine at such a price as of the beginning of next year” and the other replies: “I accept”. This is not accepted by the majority of the Islamic scholars.
The gambling-like speculative activities are found in today’s financial markets, in particular secondary, future, option and derivative markets, based on the shift of risk, from one party to another. These risk-shifting types of transactions facilitate plentiful opportunities to greedy self-interest seekers in form of profit-maximizing capitalists to exploit not only labors and management of their companies, but also other investors through financial markets.
Islam provides solution using risk-sharing scheme. The verse of al-Baqarah, waahallallahu al-bay’ wa harram al-riba (“Allah Has permitted sales and prohibited riba/interest”) complies with the profit-loss sharing or risk-sharing schemes that can be found in any society. This also fits with the another Qu’anic verse: ”The wealth must not be distributed among a few rich poeple (al-Hashr: 7). In addition, among the objectives of an Islamic economic system is to comply with maqasid al-shariah, which is to protect public interest in general or masalih al-mursalah.
It is admitted that the risk-shifting scheme provides possible means for additional wealth in financial or monetary measures without underlying assets, whereas in the risk sharing scheme, the underlying assets backing up every transaction makes the balance between monetary and financial sector with the real sector. Therefore, risk sharing or PLS scheme guarantees the presence of economic justice, equity and equality to the parties involved. Since the scheme is chiefly meant for productive purposes, the financing based on it is associated with the creation of the wealth, which moreover creates the balance betwen monetary and real sectors.
This paper is not specifically concerned with the financial crisis itself, but the acquisitive behavior of the economic agents as the root of the problems is more importance. Therefore, prevention from further social illnesses resulting from the crisis is of importance, to block the possible means of generating it. Therefore, rethinking development concept based on Islamic teaching is more emphasized. But what does development concept mean in conventional perspective? This requires a brief elaboration for evaluation in this paper.
Islamic Perspective on the Notion of Development
As discussed eralier, ‘development’ as a modern concept was initiated by the US, in effort to defeat socialist forces, and spread over the Second World, creating historical backwards by reducing human development to the level of cash-based economic progress, as measured by gross national product (GNP). This progress accelerates rapid industrialization as the main feature of the countries in the world, which had adopted the growth strategy from the periods of 1970s until recently. However, all of the above processes generate global obstacles, which have also attacked the developing countries, in various forms such as environmental damages, moral decadence, social distrust and unrest, an increase in crime and juveniles, family disintegration, growing inequalities, and mass poverty increase amid national wealthy.
In attempts to revise the concept to make the development more humane, ‘sustainable development’ is proposed encompassing environmental concerns, eradicating poverty and basic need fulfillments become the primary goals. Nevertheless, the concept remains to play around material dimensions, and does not go beyond. This is the major defect of capitalism, which, unfortunately, has also been gradually transformed into the developing economies, including Muslim countries. Therefore, solutions it provides have failed to cure major illnesses stemming from the lack of ethical values. Human tendency towards materials often leads to imbalances in pursuit of integrated mundane and spiritual dimensions. Consequently, such a concept does not sufficiently solve the problems of inequality, poverty, environmental damages, social distrust, crime, and other kinds of socio-economic disorder. This consciousness provides more rooms for Islam to enlighten the human being, and to play its vital role in driving away the dark side of materialism (al-Baqarah: 257).
Human being has been created from a single (pair) of parents, man and woman, with in principle equal rights and responsibilities in the sight of Allah (ar-Rum:21). Islam places woman as having important functions as man in the earth, being Allah’s vicegerent (khalifatul-Lah fi al-ardh). Her role as a vicegerent can be manifested through her daily-life practises as a Muslimah in general, being either a single woman, a wife, a mother, or as a member of the society (or ummah). Both man and woman are equally responsible to carry the trust of the vicegerency. The equal responsibility consequently implies the equal rights in their access to knowledge as well as other means of fulfilling such responsibilities, including, among others, pursuit of education that is emphasised in the tradition of the Prophet Muhammad SAW. He is reported to have said: “The search for knowledge is an obligation for every Muslim, man or woman.” Islam also recognizes numerous differences between them, stemming from their physical and biological differences (al-Nisa: 34). These differences necessarily lead to possible differences in their role and contributions to development and national building. Consequently, sexual division of work between man and woman is permissible in Islam, to differentiate their roles and responsibilities.
Islamic concept of development is a process of social change in all dimensions (Pramanik, 1997), stage by stage (al-Inshiqaq: 84), towards the ultimate aim of human being, which can be defined strategically in terms of national requirements of a country, it should reflect the needs for simultaneous and continuous processes of such changes towards betterment of human life. While generating the progresses in a particular point of time or generation, it also necessitates segregation of general duties and responsibilities, classified into two:
a) Intragenerational that includes interspatial roles
b) Intergenerational or intertemporal roles
Intragenerational roles mean the roles of mankind being vicegerent of Allah on earth. Man is appointed as His representative to manage and develop the universe harmoniously in all-pervasive aspects of life. In governing and developing the universe, Allah has given a rule to which obedience is a must. The order of the obedience that man is obliged is: (1) Allah, (2) the Prophet, and (3) those who have authority or ulu al-‘amr. Intragenerational leadership is a representative (khilafah) of God in the earth, and thus it assumes the third level of obedience. Along the history of the prophethood (nubuwwah), society leadership is duty and responsibility of men. Allah never assigns woman for the prophethood, and it is the secret of Him Who knows everything about His creation. It is also reflected in the leadership of prayer gathering that woman is not allowed to lead man. Nontheless, in social leeadership, this rule may be apllied less stiff, depending upon social and individuals’ capacity of every sociey. This means that woman leadership over man is aplicable to a certain level and condition, and thus, following al-Qardhawi for instance (Muqorobin, 1999), they can also seek for parliamentary seat.
On the other hand, intergenerational roles are those for the preparation of future breakthroughs. Hence, the need for human investment through education is imperative, and, this paper highlights, Islam emphasizes these particular efforts to be properly undertaken by women (Muslimat), especially young mothers with growing children, who emotionally close to them, and should take care for their growth. Accordingly, a patriarchal economic order in an Islamic society (ummah), particularly applicable to newly formed families with growing children, is considered necessary. Their roles and responsibilities are to shape the future generation, so that sustainability of generations is guaranteed.
Pattern of Woman Participation in Development
In macroeconomic analysis, most studies suggest that women participation as classified by age follows three different patterns, single peaked, double peaked, and plateau patterns (Figure 4), starting from about 15 to 65 year age. Horton (1996) on her study of women participation in seven Asian countries (India, Indonesia, Japan, Korea, Malaysia, the Philippines and Thailand) suggests double-peaked pattern being experienced by Japan and Korea and, to a lesser extent, Malaysia, as also observed in most industrialised countries. The pattern suggests that women enter the jobs in the beginning, exit at the time of marriage and childbearing, and return to the job after child rearing.
Patterns of Women Participation in Development
|Participation rate (%)|
|0 15 65 Age (year)|
The “plateau” pattern is attributable to India and Indonesia having low income, rural-base economy, and high family tight. Horton (1996) also reviews another study by Lim suggesting that India and other South Asian countries (Bangladesh, Nepal, Pakistan and Sri Lanka) follow the “low plateau” pattern, attributable to the cultural sanctions against married women participating in the work force. This is among the difficulty of development concept that hardly recognizes nature base activities. Meanwhile, Indonesia and Malaysia have the “high plateau” pattern, indicating what Lim calls as the “less age-selective nature of female” in various agriculture, domestic services, and handicraft jobs and petty trades, in which combination of child care and work was possible. She mention another pattern, “single peaked” pattern, having been experienced by Hong Kong and Singapore, due to Chinese-Confucianist beliefs that married women should attend the needs of their families. After resignation, they never return to the jobs.
As far as future generation is concerned, under condition that childcare and job is mutually exclusive, Muslim women are adequate to follow either singe- or double-peaked pattern, according to their capability in handling their activites. Alternatively, at the time of marriage and childbearing, women may also insist on the choices of household responsibility and return to work after child rearing, leading to the latter pattern, which is more appropriate to urban-base activities. This necessitates classification of jobs that require women participation. In case of hose who works on domestic sectors or home-base activities, “high-pleatau pattern” can be attained by empowering women in business activities without leaving aside their duties and responsibilities in caring their children.
The Role of Family
The concept of development has been in discussion since the mid of the 20th century, leading towards establishment of the sustainable development concept. Such a concept deconstructs the existing development theory in which monetary-measured variables were chiefly emphasised at the costs of others, leading to a broader emphasis on interrelationship among multi-variables including environment, social, politics, culture, and also legal aspects. This alternative concept has also attempted to highly incorporate women participation. However, as its basic philosophy is still anchored in materialism, the basic problems of human development in fulfilling combined basic spiritual and material needs remain unresolved. Meanwhile, in the concept, women and men seem to be viewed from different point of interest, that they have their own interests and walk on their own ways, so that integrated solutions is far from materialisation. Men and women are situated in a dichotomous places, in conflict with, or in unsound competition to each other. This is seen from wavering women movements crying emancipation in every aspect of human life, as they had been feeling subjugated longevity. Along with the materialistic worldview that places women into a subjugated position, there is a popular myth acceptable worldwide explaining sexual inequality that women position as housewives and mothers is associated with the lower status than that of men. This is so because their outputs through household and some other “informal” production processes are monetarily uncounted in GNP.
Therefore, general categorisation of intragenerational and intergenerational as discussed above is of importance, even though it does not dismiss the possible deviation of many individual cases, which are beyond the paper’s concern. Satisfying this principle is necessary, otherwise future generations would be in trouble. Farabi (1993) observes that those principles are set partly in response to sustainable development conceived by the World Commission on Environment and Development in 1987, “Meeting the needs of the present without compromising the ability of future generations to meet their own needs.” Therefore, in the absence of such a principle, sustainable development concept is nothing, as it involve considerations of the (natural) environment, and the environment degradation is recognised as having impoverished and vulnerably affected women and children in many places, as they have a deep spiritual and practical relationship with nature (Steady, 1993). Why should women be responsible for creating better future generations? Children are assets (or otherwise, if they are misguided, liability) of future generations, while women are mothers, who mould the shape, of future generations.
A logical consequence of an Islamic concept of sustainable development requires availability of (human as well as natural) resources. Moreover, provision of resources necessitates intergenerational roles of women connecting the chain of relationship between generations. Future breakthroughs of development would much depend on the quality of future human resources, and their quality in the future would be predominantly relied upon how women now are moulding them. Hence, combination of environmental health and education plays a vital role as an instrumental device to forming their shape. It is the right of children to get nutritious health, development, and education, aimed at enhancing the quality, and on the other hand as prerequisites for a success of human investment (Farabi, 1993).
On the other hand, future natural resources can be preserved by means of accessing of and controlling over current natural resources and over production factors as well as direction of (equitable and sustainable) development. Women in most societies are managers of water supply and consumers of water, the main element of natural resources, primarily for household uses. Steady (1993) and many others observe, closeness of women to many types of natural resources, not only water, has obtained international recognition. Enumeration by Dankelman (Steady, 1993) concerning the day-to-day tasks of women in relation to natural resource management encompasses: freshwater resources, land resources, energy resources, shelter and human settlements, and healthcare. All these resources are crucial to basic human needs. The continuous chain of generations is illustrated nicely in a proverb, “we have not inherited the world from our forefathers – we have borrowed it from our children.”
As far as sustainable development emphasising continuous intergenerational linkage is concerned, the existence of the institution of family, in which men and women may participate according to their adequate capabilities, is necessary. Pramanik (1997) describes the significance of the institution of family as something superior on which relative dependency of an individual (male or female) is in existence side by side with the absolute one on his Creator. Its superiority, as compared to state or market, is characterised by its ability to instilling values and ideals, moulding the new children, and in general the guiding the way to success of an individual. This confirms to the tradition of the Prophet SAW, as he is reported to have said: “Every child is born having a quality of good nature (fitrah), it is both of his parents who make him be a Jew, Magian, or a Christian.”
The family institution is among the crucial problems faced by modern conventional economic and political theories, in consonance with the move of women liberation and emancipation from men’s oppression. Therefore, abolition of the family institution is of the solutions. In contrast, Islam suggests women participation in economic, political and other outdoor activities in participation to the development of the society, so long as they are not detrimental to, but supportive of, their family life. Kautsar (1995) is of the opinion that family is considered as the smallest unit with which the formation of the Islamic society begins. Islam conceives the family as a necessary condition for growth and development of a society, and not a cause of women’s oppression. In developing and sustaining the family, the agreement among its members on the types of participation should be achieved according to their abilities. Hence, distinction of the roles of women from those of men is of the needs.
Following the theories of growth as discussed earlier, industrialisation has persisted in all over the world and in every aspect of human life. In line with participation of women in jobs, restructurization requires reduction of their involvement in the workforce, in favour of their children and household activities. This means that a certain part of women population, especially in the age between 20 and 35 years, should resign from jobs, and labor market competition to search for jobs in industry, offices, etc. in favour of the household activities and of participating in informal domestic sectors, irrespective of whether profit or income oriented or not. Generally speaking, development of human resources demands for continuous process from time to time. Family institutions plays an important role in ensuring the process of shaping the future human resources without puttig aside current breakthroughs.
Empowering Informal Sectors by Redefining Human Capital
The Quran says that the wealth must not be distributed among a few rich poeple (al-Hashr: 7). Equality holds an important position in Islam, as compared to grwoth. However, reaching double or multiple national economic indicators, such as an optimum level of equality while achieveing a relatively improvement in any other indicators like growth, is of concerns. Therefore, rethinking the theory of growth by redefining human capital is considered necessary.
The stream of ideas is that the shortage of women labor force as indicated by the double- or single-peak pattern of the rate of their participation in industries, offices or factories opens the possibility of decreasing unemployment, and thus provides the chance for male workforce to fill in the gap. The formation of massive informal sectors mainly undertaken by women would overcome the needs for families to satisfy their (at least basic) needs. For this purpose, Pramanik’s (1997: 34) suggestion to emphasize on promoting entrepreneurial abilities for workers, regardless of men or women, is needed. This demands for economic restructures.
Restructurization would lead to further empowering the workers, and thus increasing their wages, given the unemployment level. Given the existing capitalistic system, this situation would obviously push up the costs of production. Therefore, Islamic suggestion to shift from such an interest-base system into profit-loss sharing (PLS) system is inevitable. Some economists have urged the combined way of using PLS scheme involving workers participation and establishing minimum wage rate (Hasan, 1997). The profit-loss sharing system requires a separate discussion, which is beyond this present paper.
This also means that the theory of growth requires a rethink, involving the government to restructure economic policies, to provide a chance for human resources in general. The suggestion is to improve education for attaining the expected level of human capital, and at the same time shifting the workers from their position being the lower factors of production into human capital.
Human capital is then redefined in terms of improving the overall capaicities, not only skill and knowledge to achieve an expected level of growth as defined in conventional, but also other tangible capacities of the poeple in order to live satisfactorily, material as well spiritual. This definition carrying an integrated aspect of human life may achieve an expected level of growth as explicated in the models discussed above, even though the final results can be monetarily measured. An integrated education system is of significance to develop human resources with a comprehensive knowledge and capabilities that cover the dual aspects of their life.
Reforming Education System: Considering Islamization Project
In development of future human resources as the Shari’ah requires, education, training and research should be taken into account. These programs are not limited by time, but based on the concept of long-life education as the Prophet SAW advocates. It should be conducted along the history of human culture and civilization. The problem with education system in most of the Muslim countries is dichotomy or dual system between national secular and Islamic system. There are faculites of shariah or muamalah and tarbiyah under Islamic studies or Islamic institutions, living together with faculties of law, economics, education classified under modern “secular” sciences, on the other hand.
Al-Faruqi (1982) identifies this situation being part of the malaise of the ummah, bequesthed in part from the colonial system. The main factors influencing the malaises are elaborated such as political disdain, economic dependency and socio-religious influence of the Western culture and civilization. From internal Muslims’ perspective, the lack of vision, shortcoming methodology in understanding Islamic teaching that is in separation with modern knowledge become a hindrance. The ubiquitous influence of secular Western methodology among the reasons why modern Muslim scholars in various disciplines have been called upon to set up an enormous project named Islamization of knowledge. In this project, he suggests revision of the way of thinking by integrating Islamic values and knoweldge with modern sciences, beginning with implementation of the basic principle of methodology in developing Islamic sciences based on Tauhid, derived into four aspects:
1) The Unity of Allah (SWT)
2) The Unity of Creation
3) The Unity of Truth and the Unity of Knowledge
4) The Unity of Humanity
To further overcome the problem, he offers twelve step of Islamization process that can be interpreted and illustrated using the graph as in Figure 5. In the process of Islamization of knowledge, scholars in this field such as Faruqi (1982), Siddiqi (1995) and many others have envisioned the need for Islamization of methodology as the core subject Muslim scholars are to highlight. In such a case, a two-in-one approach is required, not only aimed at instilling or assimilating Islamic Islamic values into modern scineces, but developing Islamic methodology in any discipline of science on the basis of its own heritage, usul al-fiqh. Unanimous agreement has been reached concerning the mastery of both the fiqh and usul al-fiqh; in combination with modern disciplines and their methodology.
|Survey of the Ummah’s Major Problems|
|Mastery of the Islamic Legacy: the Analysis|
|Critical Assessment of the Modern Discipline|
|Critical Assessment of the Islamic Legacy
|Survey of the Problems of Humankind|
Creative Analysis and Synthesis
|Creating Discipline under Islamic Framework|
Disseminating Islamic Knowledge
|Mastery of the Modern Discipline|
|Mastery of the Islamic Legacy: the Anthology|
|Establishment of Specific Relevance of Islam to the Discipline|
An Interpretation of Al-Faruqi’s Steps of Islamization of knowledge
Redistribution of the capital
To ensure an optimum level of equality in wealth, capital accumulated as a result in economic and resources mobilization requires a just redistribution. Gradual allocation of resources in terms of capital in the country is ensured by means of redistribution or reallocation of the ownership of companies through a fraction of the shares given to the workers, in line with the implementation of risk-sharing (PLS) system as an alternative to risk-shifting or interest-base system. The difficulty arises that this process requires preruquisites such as political will of the government and the shareholders as well. As far as redistribution of capital is concerned, government regulations and policies are needed in several aspects such as:
1) Industrial relation to ensure that all the rights of the stakeholders including employees or workers are satisfied, and to give no space for exploitation of employers to their employeees;
2) National standard for minimum wages of which the implementation requires regional or local adjustment based on differences and considerations, in order to ensure the fulfilment of basic needs of the workers;
3) Redistribution of a fraction of shares can be implemented technically by giving a fraction of either the companies’ profit or shares, according to the discreation of the management.
4) Facilitating the establishment of cooperatives in support of empowering informal sectors and small medium entrepreneurship.
In relation to points (2) and (3), Hasan (1988) provides elaboration using a value-added model for production process at macroeconomic level. Hence, ownership of a fraction of capital accumulated from retained earning of private sectors can be allocated through sharing in profit. Equation (1) can be interpreted as:
VA = f (π,Wmin) (15)
where VA represents net value added, which is shared between profit (π) and minimum wage (Wmin). Profit, on the other hand is shared between capital and labor, respectively, in the ratios of x and (1-x), which rewrites equation (15) as:
VA = xπ + (1-x) π + Wmin (16)
It is clear that xπ belongs to the capital owners, while the rest goes to the workers. The minimum wage, Wmin , is a fraction of wage paid to the workers regularly. In addition, policy on the issuance of (1-x) π , which is a fraction of profit belongs to the workers, in any form such as bonus, dividends, or reinvestment to the capital (returned earnings), is subject to the discreation of the management of the company, in accordance with the required circumstances.
The concept of development, initially sparked off soon after the World-War II in 1947 is aimed at preventing dissemination of socialist ideology to developing countries. Succesful material achievements are of its significant facet being empasized, resulted in rapid progress of technology that gives rise to vast industrialization. This further accelerates economic growth of many countries in the world. However, side effects of the implementation of the concept is inevitable such as inequality, macroeconomic imbalances, environmental damages, global financial crises, moral decadence, and the like.
To overcome the defects of the concept, revised version namely sustainable development is introduced to incorporate human (and natural) aspects into it, though remedial measures for the backdraws do not clearly appear. Nevertheless, the new concept seems to open the gate of approaching scientific arena, where Islamic light can easily emanate to drive the darkness of materialism away from such a concept, so that Islamic perspective of the development may come into the existence. Islam recognizes that human being is equipped with the twin needs (and/or wants) of spiritual and material (mundane). Fulfilment of one should not be, in an extreme way, at the expense of another. Their existence is meant at achieving the ultimate aim of mankind, the victory (falah), worldly as well as falah in the hereafter. The harmonious concept of development in Islam invariably necessitates their balanced fulfilment.
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 Despite the belief in economic success as a consequence of development is unanimous, the history also witnesses a series global of economic slowdowns, especially in 1998 and 2008. Therefore, the paper views that the success is likely to be artificial.
 Mind and heart are used here to represent more physical intertwined aspects of .aql and qalb, but organize them, respectively. For further comparison and elaboration, see Hasan (1998), and Al-Attas (1989. Using these two faculties, man of understanding can observe the Greatness of Allah and His Creatures as stated in the Qur.an, Ali .Imran/3: 189-190.
 Since from equation (2),
Y(t) = K(t)a (A(t)L(t))1-a
y(t) (A(t)L(t)) = k(t)a (A(t)L(t)) (A(t)L(t))1-a
y(t) = k(t)a (A(t)L(t)) (A(t)L(t)) -1
y(t) = k(t)a (1)
 to prove: Y(t) = A(0) a L(t) a [s/(n + g + δ)]a /(1-a) (A(t)L(t))(1-a)
= A(0) a L(t) a [s/(n + g + δ)]a /(1-a) A(t) (1-a) L(t)(1-a)
= A(0) e gt L(t) [s/(n + g + δ)]a /(1-a)
Y(t)/L(t) = A(0) e gt [s/(n + g + δ)]a /(1-a)
 The CGM model uses g, instead of n, to represent the growth rate of population, and γ, instead of g for technological change over time. However, these notations are adjusted to confirm with the MRW notations.
 The quality of a nation is much determined by the quality of women, who mould the future generation, the Prophet Muhammad (SAW) is reported to have said: “women are the pillars of the country (nation), therefore, if they are virtuous then the nation would be virtuous too.”
 In Islamic perspective, ‘needs’ seem to be more emphasized rather than ‘wants’. Some authors such as Pramanik (1997), is of this view. Even if it is defined in economic terms, fulfillment of basic needs is given priorities found in Muslim/Islamic writings rather than that of growth as found in conventional one, as emphasized by, for instance, Hassan (1997). Regarding with aspects of spiritual and material, it is unanimous that all problems appearing in the concept of development, even that of poverty should be viewed from both material and spiritual, or a combined concept of both. The Prophet SAW is reported to have said: “Indeed the richness is spiritual richness.”