Popularisation of the Economy as an Economic Revolution

Note: The “popularisation of the economy,” first articulated several years ago by the Leader of the Islamic Revolution, has been interpreted in various ways. Some have equated it with a shift from a state-dominated economy to a market economy and the downsizing of government. Others have understood it as the necessity of expanding small cooperatives while reducing the power of large corporations. Still others have identified it with privatisation. Hujjat al-Islam wal-Muslimin Gholam-Ali Masumi-Niya, however, maintains that the popularisation of the economy is none of these. The head of the Economics and Banking Department at Kharazmi University has for years been engaged in teaching and research in economics and has authored numerous books and articles, including Economic Ethics, Analysis and Critique of the Prevailing Financial System, and A Fiqh-Economic Examination of Swap Contracts. A member of the scholarly council of the Fiqh of Economics Group at the Contemporary Jurisprudence Studies Research Institute, he addresses in this exclusive essay the various dimensions of the popularisation of the economy and compares it with economic systems worldwide.

The popularisation of the economy has recently received greater emphasis than ever before. This is a blessed development that should have occurred much earlier. In my humble view, it is the only way to rescue the economy from its present difficulties and to achieve the economic goals of Islam. Popularisation does not mean the domination of the private sector. Unfortunately, some officials and experts continually speak of the necessity of private-sector dominance and privatisation, whereas “privatisation” is a capitalist concept. In the capitalist system, primacy belongs to capital. In practice, owners of large capital are the principal operators of the economy, and the masses of people are merely their wage-earners. This is the inevitable outcome of the dominance of two concepts: “economic freedom” and “Darwinian competition.” Competition is so central to this system that it is also called the competitive system. In reality, once competition begins, a small group naturally surges ahead, leaving others with no choice but to work for them at fixed wages or remain unemployed. Thousands of workers with diverse skills exert all their effort. As Louis Blanc put it, “Competition is the death of competition.” In such a situation, the strong emphasis on protecting private property ultimately benefits these large capitalists most of all. In other words, the legal and judicial system primarily safeguards the interests of this class.

Dominance of the private sector or the realisation of a capitalist system?

In truth, the notion of private-sector dominance is nothing other than the realisation of a capitalist system. Some characteristics of such a system are:

Labour is compelled to work or face dismissal.
Production is not aimed at meeting needs but at producing goods that yield the greatest profit for the producer. Consequently, producing a commodity does not necessarily satisfy needs unless it maximises the producer’s profit. Vital needs have no priority over other needs that generate greater profit for the producer. (Namazi, 5th ed., 1387 Sh./2008, p. 111)

The nature and consequences of popularising the economy

In contrast, the popularisation and people-centredness of the economy is an Islamic concept. When we examine Islamic teachings, we see that the general populace must undertake economic activities—both performing them and benefiting from their fruits. This has numerous consequences, including:

Maximising the motivation of all economic actors.
Economic progress accompanied by the practical realisation of economic justice.
Under the sovereignty of Islamic teachings, the production of goods beneficial to society.

A study of the luminous rulings of Islam clearly shows that these teachings are coherent, rest on foundations entirely distinct from other systems, and were legislated to achieve specific goals. According to Shiʿi fuqahā, rulings follow real benefits and harms. Since God is the Creator of the universe and the Creator and Sustainer of humanity, He has legislated the rulings of religion as a coherent whole based on all realities of the universe, the truth and welfare of human beings, and their station in this world and the next, which is their final abode.

The evolution of economic thought in the West

To clarify the difference between popularising the economy and other economic schools, it is useful to briefly survey the development of Western economic thought in this area:

The Classical School
Classical economics, from its emergence in 1776, rested on the determination of wages through market mechanisms: “According to Smith, the manner of wage determination is like the price of any other commodity; in the short run it is determined by supply and demand… while in the long run wages are determined by the subsistence minimum of workers.” (Tafazzoli, 1392 Sh./2013, p. 118) The dominance of this thinking led employers to extract the maximum from labour while paying the minimum possible wage according to Ricardo’s “iron law of wages.” John Stuart Mill, one of the classical economists, is described as the figure “with whom classical economics reached its zenith and also began to disintegrate” (Gide & Rist, vol. 1, p. 563). In the first part of his scholarly life he supported early classical ideas, but upon witnessing their results he became a critic. He explicitly rejected the classical claim that the shares of the parties—wages, profit, and interest—are necessarily fixed by natural and immutable laws beyond human will (Gide & Rist, p. 588). He called the prevailing system the “wage-slavery system” and said: “The wage-slavery system destroys personality; it deprives a person of any ownership over the product of his labour and impoverishes the masses.” He therefore proposed replacing it with a cooperative system among workers themselves based on equal rights and collective ownership of the workshop’s capital under the direction of elected and removable managers (Gide & Rist, p. 590).
The Marxist School
The relations between labour and employers gave rise to widespread protests by workers in the late 18th and first half of the 19th centuries. In this context Marx appeared. His theory was in fact a reaction to the classical theory. Marx attributed the entire value to labour. Based on the labour theory of value, he regarded all surplus value as belonging to labour and, drawing on Ricardo’s iron law of wages, believed that because labour does not own the means of production it receives only the minimum wage while all surplus value accrues to the employer (Tafazzoli, p. 194).
The Neoclassical School
From around 1870 the neoclassicals rebuilt the classical foundations after the blows dealt by Marx—and one might say by learning from his critique. Retaining the core classical premises, they constructed a robust edifice that, despite many ups and downs, still forms the basic structure of capitalism. They revived classical economics after Marx’s attacks and expressed it in mathematical language. In macroeconomics textbooks the neoclassical analysis of producer behaviour states that a producer continues hiring labour until W = P × MPL (the wage paid to the last worker equals the monetary value of the marginal product of labour). This means that before reaching that point the value produced by labour exceeds the wage paid, and all this surplus accrues to the employer. In mass production the aggregate of these differences becomes astronomical, producing today’s billionaires who control not only the economy but global culture and politics as well. The result is that labour receives only a fixed wage while all “surplus value” goes to the employer. After the rise of the neoclassicals the situation of labour worsened: “From 1870 onward political and economic power fell into the hands of large joint-stock companies, and the government, which claimed to maintain a free system with minimal intervention, acted with severity in labour–employer disputes, resorting to police forces” (Tafazzoli, p. 419). This was followed by the Great Depression of 1929. Keynes identified the root of the crisis as insufficient effective demand—an issue Malthus had foreseen from the beginning. From that time, to resolve the problem and preserve capitalism, protective labour laws were enacted. Nevertheless, the essence of the model has been preserved; even with the emergence of new schools, the aforementioned rule remains central to macro-analysis, and employers and companies still make decisions based on it. Even if wages can rise in the short term, in the long run they revert to the subsistence minimum.

Islam’s approach to Western economic schools

Some researchers, when confronting Western economics to articulate an Islamic viewpoint, have addressed criteria for just wages and offered valuable insights (e.g., suggestions that government should guarantee workers’ minimum subsistence through social-security policies or direct subsidies, or that any reduction in the employer’s share due to minimum-wage policies should be treated as tax paid by the firm). In my view, however, our approach to this issue must be more fundamental. Examining such matters within the existing capitalist framework is inherently reactive. An active approach requires first viewing existing structures through Islamic criteria and then determining what should be done within the current framework.

Here, in the first instance, we examine existing structures from an Islamic perspective:

The capitalist employer–employee structure from a fiqh viewpoint

As noted, this structure is incompatible with Islamic standards. In it the worker’s rightful due is not given, and—more gravely—his human dignity and worth are not respected. Let us turn to the texts. Here we raise the issue from a fiqh perspective; other approaches can be explored in separate studies.

One crucial dimension is the structure of productive units. Since the Industrial Revolution vast masses of labour have worked as wage-earners for employers receiving fixed salaries. Another development was the emergence of the joint-stock company, which claimed that labour becomes a partner in ownership of productive units. Important fiqh issues arise here that require separate treatment.

The strong disapproval of becoming a wage-earner

The texts on becoming a wage-earner (ijāra) fall into two categories: one permits it, the other deems it reprehensible. Major fuqahā from the earliest times have sought to reconcile these proofs.

Permitting texts (āyāt and narrations):

Several Qur’anic verses presuppose the validity of hire, e.g.: “If they are pregnant, spend on them until they give birth; and if they nurse your child, give them their wages” (Q 65:6)—here the divorced woman is hired by the father and must be paid. “You could have taken wages for it” (Q 18:77). Shueyb’s proposal to Moses: “I intend to marry one of these two daughters of mine to you, provided that you hire yourself to me for eight years…” (Q 28:27).
Narrations permitting hire: Imam Ṣādiq (ʿa) in the well-known narration in Tuḥaf al-ʿUqūl: “There is no harm in a person hiring himself out…” Imam ʿAlī (ʿa): “God has informed us that hire is one of the means of livelihood of people…” Imam ʿAlī (ʿa) hired himself to a Jew to draw water from a well, receiving one date per bucket.

Narrations deeming hire reprehensible:

Mafżal b. ʿUmar: “I heard Imam Ṣādiq (ʿa) say: ‘Whoever hires himself out has barred his own sustenance.’ In another version: ‘How could he not bar it when whatever he earns belongs to the employer who hired him?’”
Similar narrations from Imam Bāqir (ʿa).
ʿAmmār al-Sābāṭī: A man can trade; if he hires himself out he is given what he would earn in trade. The Imam replied: “He should not hire himself out but seek sustenance from God Almighty and engage in trade; for if he hires himself out he bars his own sustenance.”

Reconciling the proofs: Two main reconciliations have been offered:

The prohibiting narrations are limited to becoming a “servant” (mazdūr) in the full sense—i.e., selling one’s entire time, either the lighter form (monthly/yearly wage) or the extreme form (live-in domestic servant). The former is reprehensible, the latter most reprehensible. Hiring oneself for fixed hours (e.g., eight hours a day) while remaining free at night is not “selling one’s life.”
The prohibiting narrations apply when the worker is not paid his full due. The Imam’s reasoning—“How could he not bar it when whatever he earns belongs to the employer who hired him?”—indicates that the disapproval arises when the wage is unjust. When justice is observed, as in Moses’ hire by Shueyb (who paid fully and Moses declared satisfaction: “Whichever term I complete, there shall be no harm upon me”—Q 28:28), there is no disapproval. ʿAllāma Majlisī I: “Hire sometimes humiliates a person… hence the Imam conditioned permissibility on ‘if he acts honestly to the best of his ability’—i.e., the employer’s right is observed, as when Moses hired himself to Shueyb.”

Fiqh ruling on productive structures

The ideal is that the generality of workers work for themselves. This is the meaning of a people-based economy. The Prophet (ṣ) is reported to have said: “Three groups I will oppose on the Day of Resurrection… one who hires a worker, takes full work from him, but does not pay him his full wage.” Full payment (īfāʾ) vs. full extraction (istīfāʾ). From this a very important conclusion follows: in many cases the market price is not the just price.

We saw earlier that the capitalist structure inevitably leads to domination by large capitalists. Though in theory everyone enjoys complete economic freedom and can compete, in practice a few surge ahead and the gap continually widens. In such a structure a large portion of the worker’s output—far exceeding the wage paid—accrues to the employer. When Islam, in an era when employer–employee relations were far simpler, deemed hire with the above characteristics reprehensible, how can the wage determined in today’s structure be considered just?

The principal criticism is directed at the fundamental framework of capitalism and its incompatibility with the luminous standards of Islam. The regulations laid down by the great fuqahā from the earliest codification of fiqh strongly confirm this.

A people-based economy: Islam’s desired economic structure

The desirable Islamic situation can be termed a “people-based economy.” Its meaning is that structures and relations must be defined so that workers fully benefit from the fruit of their effort and initiative. One of the most important duties of the Islamic system is to design and implement appropriate structures that both preserve the worker’s dignity and ensure he receives the full product of his labour. In the West too, thinkers and groups have sought alternatives: the International Co-operative Alliance and the Mondragon Corporation are examples that have been implemented in various countries with successful outcomes (e.g., the 2023 Global Cooperative Monitor reports that the turnover of the world’s top 300 cooperatives was $2,409.41 billion).

Mentioning these cases is not meant as full endorsement. Since liberal models dominate economic literature, drawing attention to rival models and their performance can be influential. These models must of course be continually evaluated. To design collective institutions within Islamic regulations and operationalise them, all ideas and partial experiences from various countries should be utilised—such as real-sector business models and microfinance models in the financial sector—provided they remain within Islamic bounds and avoid eclecticism.

When we speak of “popularisation,” our intention goes far beyond such models. Popularisation means creating an environment in which every individual who wishes to be economically active can do so to the extent of his or her ability—sometimes individually, and very often, especially for large undertakings, within a collective institution out of necessity or preference. All cases are included. The idea of “popularisation” is the creation of a revolution throughout the entire economy.

By way of conclusion, the words of the Leader of the Revolution: “One of the most important requirements for implementing the slogan of controlling inflation and boosting production is involving the people; this is a decisive and extremely important issue. We have performed weakly in this area… If we can—not merely in words, which we have repeated constantly, but in practice—attract people’s participation, growth in production will be certain. What definitively brings about growth in production is the presence of the people in production—in all sectors, from small-scale to large-scale production carried out by the people. This very growth in production will itself affect the control of inflation.” (15/01/1402 Sh./2023)

A few important reminders

In existing undesirable structures, the criterion of “justice” must be applied to the greatest extent possible.
Many fuqahā consider taking wages for specifically mandated obligations unlawful. Regarding judges, if judging is an individual obligation (wājib ʿaynī) in case of need, they may receive sustenance from the public treasury (bayt al-māl), not a wage.
The Islamic government possesses many instruments; for example, anfāl (public resources) largely belong to the government, but this does not mean it must directly manage everything. Islam intended the government to have extensive authority so that, through proper planning and supervision and utilising the immense capacity of the people, it can create the best possible situation.
Some equate popularisation with micro-businesses, whereas it has a vast scope encompassing all micro and macro domains. The entire economy must become people-based, though certain domains (e.g., banking) have a governmental character, others a national character, etc., which the government must undertake.
Islam deems becoming a wage-earner reprehensible yet prescribes numerous duties for the worker once hired. Details of the duties of employer and employee are given in Economic Ethics.
The success of desirable real-sector structures requires fundamental transformation in the financial sector. With the current state of money and capital markets, even the best real-sector models will not succeed.
The topics in macroeconomics concerning labour supply and demand (and thus aggregate supply) and wage theories must be evaluated against the Islamic standards mentioned—a task for another study.
The experience of privatisation in our country has not been successful, both theoretically from the outset and in execution. Some policies recommended in this regard have failed. Although implementation problems exist, the root cause has been and remains the dominance of liberal thinking in decision-making centres. Until an intellectual revolution occurs in this area, the present situation will persist.
Finally, the issue of popularisation has many other dimensions—fiqh and otherwise—that, God willing, will be addressed in a comprehensive study.

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