A Political Economy Approach to Islamic Economics: Systemic Understanding for an Alternative Economic System

Abstract

This paper, thus, is an attempt to discuss the systemic nature of Islamic economics, in which it argues that the modern variant of Islamic economics is a development that began in the 1970s with an alternative system understanding to the existing capitalist modes of production. In this new discourse, Islamic economics held that the capitalist economic order was responsible for the failure of economic development and environmental issues in developing countries. Therefore, it claimed to be an alternative economic system, that, also, owed its development to the emergence of identity politics in the 1970s.

With the rapid development of Islamic finance, research focusing on the foundational base, namely Islamic economics, has been largely ignored. However, without establishing the foundational norms, which is the ethical system of this new paradigm, it is not possible to have a robust financial system, as in Islamic finance. This paper, therefore, explores the original wisdom in revealing the systemic and alternative system discourse of Islamic economics regardless whether such a system is a possible or not.