(The author can be contacted at farby@cyber.net.pk)

This is article is a response to Mr. Akif Safi’s column, titled ‘The Discovery of Economy’, appearing in The Renaissance, May 2001. The major part of the column consists of the writer’s concern over present social, ethical and material state of affairs of Muslims, and his wishes for the OIC1 world be a better place to live in like the West; and there are a few words on the subject suggested by the title. In those few words, the writer outlines a new economy for the OIC world with the following features:

1. Abolishing currency value system and maintaining one-to-one relationship among currencies.

2. Setting equal prices of goods and services in all Muslim countries.

3. Setting equal wages and salaries in all Muslim countries.

4. Giving every one the same standard of living as that of Europe and America.

5. Free provision of some public goods and services.

6. Free movements of goods, services and labour among OIC countries.

I will give some brief comments on these proposals.

1. Until a Utopia is formed of a politically one unit of OIC world, the currencies cannot be par valued by any means2. Value of each currency, in terms of other currencies, is determined on the basis of its own demand and supply conditions in the foreign exchange market. Demand and supply, in turn, determined by the level of export and imports; while exports and imports depend on a plethora of domestic and global economic factors. Economic factors of Muslim countries are very diversified (unlike Euro area) and market conditions in these countries are not similar. Therefore, it is not possible to equalize all currencies. In fact, it is not a necessary condition for the economic development of Muslim countries.

2. Equal prices of goods and services in all countries is not less than a child’s yen. Price of one particular good may vary in different cities of the same country; even two markets of the same city have not equal prices of the same good; then how can they be equalized across the whole OIC world. Actually, it is important to understand the mechanism of price determination3.

3. Same comments as above (No. 2) apply to the proposal of uniform wages and salaries. Uniform wages and salaries are not only impossible but also unnatural. However, one can still argue that a person, having same skill and working the same work-hours, gets less remuneration in Pakistan than in Saudi Arabia, which seems contrary to justice. But if analyzed in terms of real wages (i.e. nominal wages deflated by price level), then this difference will become marginal if not diminished. Whatever difference remains is due to the differences in conditions prevailing in the labour markets of two countries.

4. The government though should ensure the provision of basic necessities of life to every inhabitant, but there is no case of keeping the same standard of life for every body – neither in Islam nor in economic paradigms. You can wish and argue that the average living standard of Muslims should be upgraded to that of Europe and America; but for this purpose Muslims have to work hard like Americans and Europeans. Unfortunately, we Muslims have a very disappointing attitude towards work in general and research and analysis in particular. We have given up research even in our own religious affairs, set aside science and technology. Good wishes can never be materialized, if not supported by actions.

5. Since every service, whether private or public, has some cost of production, so there is simply no question of free provision of these services. However, some social safety nets can be devised such that people get these services free when they use according to their needs but pay at some other time according to their ability to pay. Such types of systems exist even today in most Muslim countries, but they are not working efficiently due to corruption at grass root levels.

6. In fact, this is the only proposal which seems sensible to some extent. It is easier to have a free trade zone of OIC countries than to have one country, one language, and one currency for the whole OIC world. If the objective is to enhance economic well being of the people of Muslim countries then a free trade zone can contribute significantly towards this end. In short, there is no need to wait for all Muslims countries getting together, giving up their regional and political identities and/or making one OIC economy.

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1. Organization of Islamic Countries

2. The economic, social and political systems in the world, as they are at present, have evolved in centuries. Neither can these be changed overnight nor the wheel of time can turn back. Thus a realistic and forward looking approach would be to find ways in the present scenario and try to change evils not every thing.

3. Some elementary textbook on microeconomics may be consulted for this purpose.