The Paradigm of Islamic Political Economy: An Institutionalist Analysis of Myth and Reality

Abstract

From its genesis in the seventh century onwards, Islam has been a major paradigm that has shaped the politico-economic life of a vast portion of the world population, nearly a quarter at present. In view of the underdeveloped or developing structures of Muslim-majority nations, it has mostly been assumed that Islam predicates an autocratic theocracy and a conservative, rather than a progressive, economic policy that retards scientific research and entrepreneurial innovation. Conversely, with a reactive consciousness, orthodox Muslims take it for granted that Islam’s divinely ordained normative axioms would be enough for them to spontaneously establish the most conciliatory political regime on the earth and an advanced economic system irrespective of the power and money-oriented dimensions of human interaction and the assimilative potential of capitalist world economy. To clarify this ambiguity between the reductionist and mythicising perceptions over the theory and praxis of Islamic political economy, this paper first and basically examines its framing institutions at the level of theory and then the causes and consequences of [in]consistencies between its theoretical axioms and their praxis by the Muslim nations.

Keywords: Islamic Economics, Islamic Politics, Institutional Theory, Political Economy, Theory, Praxis

JEL Classification: A12, B15, B59, Z12, P16