Post-Crisis Political Economy: Neoliberalism or Islamic Alternative?

Abstract

The global financial crisis that unfolded since the end of 2006 has shaken the very foundation
of the Western free-market economic system. Its fundamental regulatory principle of the
separation of state and market is now seriously discredited. The objective of this article is to
argue that the economic principles of Islam can provide a better alternative to the free-market
system. Firstly, an Islamic economic system is highly integrative where the purpose and
interest of the state and the individual citizen overlap and are complimentary to each other. So,
market and state are rather inseperable in Islamic political economy. Secondly, the free-market
system is fundamentally oriented to the philosophy of unlimited consumption, that is – greatest
number produces greatest happiness, which demands production and appropriation of
resources beyond needs. But the Islamic economic philosophy puts restrictions on unnecessary
consumption, thereby capping competition over resources. These two essential principles in
Islamic political economy are highly interdependent on state and individual agency of a human
being. Therefore, once the economic needs and purpose of the state and the individual citizen
are properly enmeshed, it produces a balanced market system. Islamic political economy has
moral regimes and instrumental structure for economic behavior that reinforce each other.