The systems of
contract relied upon by merchants was very effective. Merchants would buy and sell on
commission, with money
loaned to them by wealthy investors, or a joint investment of several merchants, who were often Muslim, Christian and Jewish. Recently, a collection of documents was found in an
Egyptian
synagogue shedding a very detailed and human light on the life of medieval Middle Eastern merchants. Business
partnerships would be made for many
commercial ventures, and bonds of
kinship enabled trade
networks to form over huge distances. During the ninth century banks enabled the drawing of check-in by a bank in
Baghdad that could be cashed in
Morocco. The concepts of
welfare and
pension were introduced in early
Islamic law as forms of
Zakat (charity), one of the
Five Pillars of Islam, since the time of the
Abbasid caliph Al-Mansur in the 8th century. The taxes (including
Zakat and
Jizya) collected in the
treasury of an Islamic
government was used to provide income for the needy, including the poor, elderly, orphans, widows, and the disabled. According to the Islamic jurist
Al-Ghazali (Algazel, 1058–1111), the government was also expected to store up food supplies in every region in case of a disaster or famine occurs. The
Caliphate was thus one of the earliest
welfare states, particularly the
Abbasid Caliphate. An early
market economy and early form of
merchant capitalism developed between the 8th and 12th centuries. A vigorous
monetary economy developed based on the wide circulation of a common currency (the
dinar) and the integration of previously independent monetary areas. Business techniques and forms of
business organization employed during this time included early contracts,
bills of exchange, long-distance
international trade, early forms of
partnership (
mufawada) such as
limited partnerships (
mudaraba), and early forms of credit, debt, profit, loss,
capital (
al-mal),
capital accumulation (
nama al-mal),
trusts (
waqf),
savings accounts,
transactional accounts, pawning, loaning,
exchange rates, bankers,
money changers,
ledgers, deposits,
assignments, the
double-entry bookkeeping system, and
lawsuits.
Organizational
enterprises similar to
corporations independent from the
state also existed in the medieval Islamic world. Many of these concepts were adopted and further advanced in
medieval Europe from the 13th century onwards.
Islamic India During the
Muslim rule in India, realms such as the
Delhi Sultanate,
Bengal Sultanate,
Mughal Empire,
Nizam of Hyderabad and the
Kingdom of Mysore made significant contributions to the South Asian economy. In the 17th century Mughal India became the world's largest economy, becoming the leading textile manufacturing power in the world, valued over 25% of world
GDP. The concepts of
welfare and
pension were present in early
Islamic law as forms of zakat one of the
Five Pillars of Islam, since the time of the
Rashidun caliph Umar in the 7th century. The
taxes (including zakat and jizya) collected in the
treasury (
bayt al-mal) of an
Islamic government were used to provide income for the needy, including the poor, the elderly, orphans, widows, and the disabled. According to the Islamic jurist
Al-Ghazali (Algazel, 1058–1111), the government was also expected to stockpile food supplies in every region in case of disaster or famine. The Caliphate was thus one of the earliest
welfare states. This helped establish the
Rashidun,
Umayyad, Abbasid,
Ayyubid and
Fatimid Caliphates as the world's leading extensive economic powers in the 7th-13th centuries. Due to religious sanctions against debt,
Tamil Muslims have historically been
money changers (not money lenders) throughout South and South East Asia.
Agriculture in the medieval Islamic world From the 8th century to the 13th century in Muslim lands many crops and plants were planted along Muslim trade routes, farming techniques spread. In addition to changes in economy, population distribution, vegetation cover, agricultural production, population levels,
urban growth, the distribution of the labor force, and numerous other aspects of life in the Islamic world were affected according to Andrew Watson. However this is disputed by other scholars, who claim cultivation and consumption of staples such as
durum wheat, Asiatic rice, and
sorghum, as well as cotton, were already commonplace centuries before, or that agricultural production declined in areas brought under Muslim rule in the Middle Ages. The early Abbasid Caliphate also had the highest literacy rates among pre-modern societies, alongside the city of
classical Athens in the 4th century BC, and later,
China after the introduction of printing from the 10th century. One factor for the relatively high literacy rates in the early Islamic Empire was its parent-driven educational marketplace, as the state did not systematically subsidize educational services until the introduction of state funding under
Nizam al-Mulk in the 11th century. Another factor was the diffusion of
paper from China, which led to an efflorescence of books and written culture in Islamic society, thus
papermaking technology transformed Islamic society (and later, the rest of
Afro-Eurasia) from an oral to
scribal culture, comparable to the later shifts from scribal to
typographic culture, and from typographic culture to the
Internet. Other factors include the widespread use of paper books in Islamic society (more so than any other previously existing society), the study
and memorization of the
Qur' an, flourishing commercial activity, and the emergence of the
Maktab and
Madrasah educational institutions.
Islamic capitalism Early forms of
mercantilism and
capitalism are thought to have developed in the
Islamic Golden Age from the 9th century. From the 11th to the 13th centuries, the "
Karimis", an enterprise and
business group controlled by
entrepreneurs, came to dominate much of the Islamic world's economy. The group was controlled by about fifty Muslim
merchants labeled as "Karimis", who were of
Yemeni,
Egyptian and sometimes
Indian origin. Each Karimi merchant had considerable wealth, ranging from at least 100,000
dinars to as much as 10 million dinars. The group had considerable influence in most important eastern markets, and sometimes influenced politics through its financing activities and through a variety of customers, including
Emirs,
Sultans,
Viziers, foreign merchants, and common consumers. The Karimis dominated many of the
trade routes across the Mediterranean, the
Red Sea, and the
Indian Ocean, and as far as
Francia in the north, China in the east, and
sub-Saharan Africa in the south, where they obtained gold from
gold mines. Practices employed by the Karimis included the use of
agents, the financing of
projects as a method of acquiring capital, and a
banking institution for loans and deposits.
Islamic socialism Though medieval Islamic economics appears to have somewhat resembled a form of capitalism, some arguing that it laid the foundations for the development of modern capitalism, Others see Islamic economics as neither completely capitalistic nor completely
socialistic, but rather a balance between the two, emphasizing both "individual economic freedom and the need to serve the common good." The concepts of
welfare and
pension were introduced in early
Islamic law as forms of
Zakat (charity), one of the
Five Pillars of Islam, during the time of the
Rashidun caliph
Umar in the 7th century. This practiced continued well into the era of the
Abbasid Caliphate, as seen under
Al-Ma'mun's rule in the 8th century, for example. The
taxes (including
Zakat and
Jizya) collected in the
treasury of an Islamic
government were used to provide
income for the
needy, including the
poor,
elderly,
orphans, widows, and the
disabled. According to the Islamic jurist
Al-Ghazali (Algazel, 1058–1111), the government was also expected to stockpile food supplies in every region in case a
disaster or
famine occurred. The
Caliphate is thus considered the world's first major
welfare state.
Industrial development Muslim engineers in the Islamic world were responsible for numerous innovative industrial uses of
hydropower, early industrial uses of
tide mills,
wind power, and
fossil fuels such as
petroleum. A variety of industrial mills were used in the Islamic world, including fulling mills, gristmills, hullers, sawmills, shipmills, stamp mills, steel mills, sugar mills, tide mills, and windmills. By the 11th century, every province throughout the Islamic world had these industrial mills in operation, from al-Andalus and North Africa to the Middle East and Central Asia. Muslim engineers also employed
water turbines, and gears in mills and water-raising machines, and pioneered the use of dams as a source of water power, used to provide additional power to watermills and water-raising machines. Such advances made it possible for many industrial tasks that were previously driven by
manual labour in ancient times to be
mechanized and driven by machinery instead in the medieval Islamic world. The transfer of these technologies to
medieval Europe later laid the foundations for the
Industrial Revolution in 18th century Europe.
Urbanization There was a significant increase in
urbanization during this period, due to numerous scientific advances in fields such as agriculture,
hygiene,
sanitation,
astronomy,
medicine and
engineering. This also resulted in a rising
middle class population. The head of the family was given the position of authority in his household, although a
qadi, or judge was able to negotiate and resolve differences in issues of disagreements within families and between them. The two senior representatives of municipal authority were the qadi and the
muhtasib, who held the responsibilities of many issues, including quality of water, maintenance of city streets, containing outbreaks of disease, supervising the markets, and a prompt burial of the dead. Another aspect of Islamic urban life was
waqf, a religious charity directly dealing with the qadi and religious leaders. Through donations, the waqf owned many of the
public baths and factories, using the revenue to fund education, and to provide irrigation for orchards outside the city. Following expansion, this system was introduced into Eastern Europe by Ottoman Turks. Taxes were also levied on an unmarried man until he was wed. Non-Muslims were required to pay the
jizya, an administrative tax on non-Muslims analogous to zakat (a Muslim only tax). The Jizya was applied only to young able-bodied adult males and exempted non-Muslims from military service. The Muslim state would then be responsible for the administration & security of the Non-Muslims. ==Classical Islamic economic thought==