Download Professorial Inaugural - Universiti Tun Abdul Razak

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Inaugural
Professorial
LECTURE
PROFESSOR DR. SYED OMAR BIN SYED AGIL
THURSDAY, 25 FEBRUARY 2010
RAZAK CAMPUS , KUALA LUMPUR
UNIVERSITI TUN ABDUL RAZAK
PINTAR CAMPUS
16-1, Jalan SS6/12, Kelana Jaya,
47301 Petaling Jaya, Selangor
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E-mail: [email protected]
Website: www.unitar.edu.my
RAZAK CAMPUS
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50100 Kuala Lumpur
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electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the publisher. Published by Universiti Tun Adbul Razak.
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INAUGURAL PROFESSORIAL LECTURE SERIES 2010
PROFESSOR DR. SYED OMAR BIN SYED AGIL
BIOGRAPHY
Dr. Syed Omar bin Syed Agil is Professor and Deputy Dean at the Razak School of Government, Universiti Tun
Abdul Razak and was an Associate Professor at the Faculty of Business Administration since 1998. Currently,
he is also the Deputy Chairman of UNITAR Case Writers Club. He obtained his Ph.D from Universiti Tun Abdul
Razak in 2007, his MA in Economics in 1984 and BSc in Economics and Mathematics in 1982 from Northern
Illinois University, USA. His previous positions at Universiti Tun Abdul Razak include Deputy Dean of Faculty of
Business Administration, Head of Academic Affiliation and Collaboration Department, Head of Student Affairs
Department and Deputy Dean of Graduate School. In addition to teaching graduate courses in economics and
business ethics, and previously, Islamic Economics, Islamic Finance and Banking and Zakat Administration at the
undergraduate level, he is also involved in postgraduate supervision and research. Before joining Universiti Tun
Abdul Razak, he had been a lecturer and Assistant Professor and Head of Economics Department of Kulliyyah of
Economics,International Islamic University Malaysia (IIUM), a research fellow of Institute of Islamic Thought and
Civilization (ISTAC), a fellow of Institute of Islamic Understanding (IKIM) and Chief Operation Officer of Institute
Perkembangan Minda (INMIND). Dr. Syed Omar has written extensively on Islamic economics, management,
finance and the thoughts of Ibn Khaldun. He has authored, co-authored and co-edited 17 books and
monographs. His most recent book which was published in 2008 is The Muqaddimah of Ibn Khaldun: Religion,
Human Nature and Economics. Other publications include Readings in the Concept and Methodology of Islamic
Economics, Readings in Microeconomics: Islamic Perspective, An Introduction to Islamic Economic and Finance,
Revitalizing People for the Future: The Islamic Way of Achieving Management Excellence, Lessons on Excellence and
Successful Management from Islamic History, Wawasan 2020: Moral, Pengindustrian dan Keilmuan, Kemahuan
Untuk Berubah: Prasyarat Menuju Malaysia Maju tahun 2020, Lessons on Excellence and Successful Management
in Islamic History, Budaya Ilmu dan Kecemerlangan Bangsa Melayu, Pengurusan Badan Korporat and Nilai Islam
and Sistem Akauntabiliti dalam Pengurusan Islam. He has also written 47 articles in Journals and local newspapers
and presented 48 papers at local and international seminars and conferences. Some relevant papers include
Islamic finance in the Economic History of the Malays: A Preliminary Study based on the available historical
documents, Psychological Behavior and Economics: The Need for New Theories and Redefinition of Basic
Concepts in Islamic Economics and Rationality in Economic Theory: A Critical Appraisal. Besides the latest book
on Ibn Khaldun, he has also authored Ibn Khaldun’s Theory of Social Science and the Rise and Fall of Nations and
presented papers on Man, Society and Leadership in the Prolegomena: Exploring the Thoughts of Ibn Khaldun and
Ideas on Education in the Prolegomena of Ibn Khaldun at international conferences. He has also produced several
case studies relating to management and economics.
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AN INQUIRY INTO THE CAUSES AND COSTS OF
ECONOMIC GROWTH: WHAT POLICY MAKERS OF TODAY
CAN LEARN FROM THE MUQADDIMAH OF IBN KHALDUN
ABSTRACT
History is a continuum of the past, the present and the future.
It also tells us about the causes of the rise and fall of nations
and civilizations. At each age scholarship comes to define the
features and becomes pivotal to the progress of a civilization. The
Muqaddimah of Ibn Khaldun or also known as the Prolegomena
is a model of a distinguished and remarkable work of scholarship
that defined the socio-historical realities and intellectual progress
of its time. History tells us that Adam Smith’s magnum opus, An
Inquiry into the Nature and Causes of the Wealth of Nations, first
published in 1776, is considered by many as the founding work
of modern school of economics and the progenitor of modern
economic theories. However history also tells us there is enough
evidence attesting to the fact that Ibn Khaldun’s magnum opus,
The Muqaddimah, written four centuries earlier in 1377, had first
promulgated the economic theories propounded by Adam Smith in his Wealth of Nations. Like the Wealth of
Nations, The Muqaddimah also examines the relationship between division of labor, specialization and creation
of wealth which cause a nation’s prosperity. Where Adam Smith used the example of pins, Ibn Khaldun used the
example of the production of wheat in elucidating the division of labor. Unlike Adam Smith, Ibn Khaldun
employs a systemic approach and sees the interrelationships between economic, social, psychological, religious
and political factors in explaining economic growth and costs of economic growth. He advocates and attempts
to construct an integrated economic system that is a hybrid of market mechanism, the role of government and
religious precepts. Religion in The Muqaddimah is a critical factor in enhancing business activities and growth of
entrepreneurship with the formulation of business friendly public policies based on fairness, justice and economic
freedom. Man occupies a unique position in Ibn Khaldun’s social and economic thought. Man’s ability to think
and the human nature of gregariousness, aggressiveness and desiring authority are instrumental in the evolution
and development of societies and becomes the impetus for change. Ibn Khaldun believes that division of labor
results in economic growth which eventually leads to beneficial impacts of an increase in population, prosperity,
urbanization, advancement of scientific knowledge and technology, innovation, education and scholarship,
the emergence of the wealthy class and improvement in the quality of labor and skills, development of new
knowledge and sciences, migration and growth of cities. However, he also examines the consequences of
relentless pursuit of economic growth which he finds unsustainable and wrote about the costs of economic
growth-the degradation of the environment, congestion, and increase in the cost of living, poverty,
unemployment, corruption and moral decline which impinges on the quality of life of the population resulting in
emigration and decline of cities. This Professorial Lecture focuses on Ibn Khaldun’s work on the causes and costs
of economic growth and what policy makers of today can learn.
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AN INQUIRY INTO THE CAUSES AND COSTS OF
ECONOMIC GROWTH: WHAT POLICY MAKERS OF TODAY
CAN LEARN FROM THE MUQADDIMAH OF IBN KHALDUN
Firstly, I am honored to be given this opportunity to deliver this Inaugural Professorial
Lecture and therefore I would like to express my heartfelt gratitude to the President & Vice
Chancellor and top management of Universiti Tun Abdul Razak. Secondly, as a servant
of Allah, my praise is definitely to the Creator for giving me the strength and the spirit to
prepare and deliver this lecture. This lecture is primarily based on text analysis and the
objective is to attempt to provide a modern interpretation of Ibn Khaldun ideas on the
causes and costs of economic growth from his magnum opus, The Muqaddimah or also
known as the Prolegomena. Although there is some literature produced on Ibn Khaldun’s
views on economics, in general nothing has been written on his views on the costs of
economic growth in which this lecture will attempt to elucidate.
History is a continuum of the past, the present and the future. It also tells us about the
causes of the rise and fall of nations and civilizations. At each age scholarship comes to
define the features and becomes pivotal to the progress of a civilization. The Muqaddimah
of Ibn Khaldun is a model of a distinguished and remarkable work of scholarship that
defined the socio-historical realities and intellectual progress of its time. History tells us
that when Adam Smith published his magnum opus, An Inquiry into the Nature and Causes
of the Wealth of Nations, in 1776, it is considered by many as the founding work of modern
school of economics and the progenitor of modern economic theories. However history
also tells us that there is enough evidence which attested to the fact that Ibn Khaldun’s
Muqaddimah published four centuries earlier in 1377, had first promulgated the
economic theories propounded by Adam Smith in his Wealth of Nations.
Unlike the Wealth of Nations, The Muqaddimah of Ibn Khaldun sees the relationship
between religious and economic factors in the explication of his ideas on the division
of labor, economic growth, population growth, poverty, inflation, unemployment,
business cycles, crime, environmental quality, migration and the growth and decline of
cities which are also contemporary economic and social issues incessantly affecting the
modern man.
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This lecture will be divided into four broad topics. First, An Introduction of Ibn Khaldun
and The Muqaddimah, Second, Economic Growth Theories and the Benefits and Costs of
Economic Growth in Western Economics. Third, The Khaldunian Mind and His Economic
Methodology, His Theory of Man and Society and lastly, The Causes and Costs of Economic
Growth in The Muqaddimah.
A BRIEF INTRODUCTION TO IBN KHALDUN AND THE MUQADDIMAH
Ibn Khaldun was one of the great thinkers of Islam and aremarkably brilliant fourteenth
century historian, economist and sociologist. He appeared at a time when the Muslim
civilization wasat the dismal stage of decline and senility, while Europe was still at the
nascent stage of rebirth in intellectual and scientific growth after going through a relatively
stagnated scholarship for nearly six hundred years. Born in Tunis in 1332 A.D and died
in Egypt in 1406 A.D, Ibn Khaldun had expounded and elucidated his ideas and works
on social theories that constitute a significant and unique contribution and considered
a notable phase in the development of Muslim intellectual thought and legacy. The
Prolegomena written by Ibn Khaldun was the result of assiduous research and a work of
great erudition, coherence and originality.
Ibn Khaldun explains that his motivation to write the Prolegomena and his larger treatise
Kitab Al-Ibar is to re-write history in the context of the new conditions and circumstances
confronting the declining Islamic world and the world at large although other historical
works had preceded the Prolegomena. Change necessitated a revisit and revision of
historical information (Khaldun, 65). Ibn Khaldun’s epistemology and his empirical and
rational nature of inquiry in the nature and causes of rise and decline of nations led him to
the process of collecting empirical facts to identify and abstract patterns and connections
between events to formulated general propositions and laws, just as any modern scientist
would do in applying scientific method in studying natural phenomena. To Ibn Khaldun,
history has external and internal meaning (Khaldun, 6).
Ibn Khaldun anticipated Hobbes in his unique and original method to writing the
Prolegomena published more than two centuries earlier than the Leviathan. No wonder
Toynbee (1961), one of the greatest British historians in his Study of History has this to say
about the Prolegomena,
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‘… in the Prolegomena (Muqaddimah) to his Universal History he has conceived and formulated
a philosophy of history which is undoubtedly the greatest of its kind that has ever yet been
created by any mind in any time or place’.
Enan (1946) praised Ibn Khaldun as follows:
‘It was thus that Western scholars discovered with astonishment and admiration that Ibn
Khaldun had studied many of those theories which were treated by Machiavelli a century later
and by Vico, Montesquieu, Adam Smith and Auguste Comte, some three or four centuries later.
It was believed that Western research was the first to discover the philosophy of history and the
principles of sociology and political economy but it was then found that Ibn Khaldun had long
preceded the West, and had treated those subjects in his Prolegomena and expounded many of
their theories with intelligence and vigor. Thus Western research, after discovering and studying
Ibn Khaldun, places his legacy most highly, considers him a philosopher, historian of civilization,
a scholar of sociology and political economy and moreover acknowledges him to be the first to
treat theses subjects’.
It is rather perplexing and ironic to discover that despite the recognition, appreciation and
acknowledgement by the western world on Ibn Khaldun’s contribution to Social Science,
neither his name nor his ideas were explicitly or implicitly mentioned in any book on the
history of Social Science. It is equally surprising and a matter for academic concern that the
names of Hume, Adam Smith, Hegel, Hobbes, Comte, Montesquieu, Vico, Machiavelli, Karl
Marx, Max Weber and the ancient, medieval and modern social scientists were noted for
their contributions in these books on history of social science, while the Prolegomena which
has been hailed by many Eastern and Western writers for surpassing and anticipating the
works of these social theorists was not at all recognized.
As an illustration, in one of the pages on Ibn Khaldun, Encyclopedia Britannica mentions as
follows: ‘In the more than 1,000 years between the times of the philosopher Aristotle in ancient
Greece and the writer Machiavelli in Renaissance Italy, the most preeminent social scientist in
the West was a Muslim Arab scholar named Ibn Khaldun. He was a historian, philosopher of
history, and sociologist, much of whose life was devoted to public service and teaching’.
However on the Social Science section in the Encyclopedia Britannica itself, all of the above
social scientists were mentioned, except Ibn Khaldun, inadvertently obliterating any single
contribution he has made to Social Science.
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As I read through the pages of the Prolegomena, endeavoring to understand the
coherence, systematic analysis and synthesis of his ideas and arguments and his assiduous
independent thinking in formulating his social and economic theories, I am struck
with awe and deep reverence to know a man who had gone through a long drawn out
process of trials and tribulations-the tragic death of both of his parents and teachers in
the Great Plague, the tragic loss of his wife and children, the political upheavals, intrigues,
conspiracies and imprisonments he had experienced, and yet succeeded in being compos
mentis to advance a most conscientious piece of work-a chef d’oeuvre comparable to the
intellectual works of the Renaissance.
ECONOMIC GROWTH THEORY IN WESTERN ECONOMICS
This section of the Professorial Lecture is a brief literature review of economic growth theory
in western economics to provide some insight as to the origins of contemporary thinking
in economic growth. Economists have long been interested in the factors which causes
different countries to grow at different rates and achieve different levels of wealth. In
general western economists divided growth theories into classical, neoclassical and new
growth theories and divided the history of growth theory into two phases: until early 1970’s,
it is labeled exogenous growth theory, and, starting in late 1980’s until the present, the new
growth or endogenous growth theory.
The endogenous growth theory or new growth theory was developed in the 1980s as a
response to criticism of the neo-classical growth model, popular in the 1950s which states
that the long-run rate of growth is exogenously determined (the Harrod-Domar model and
the Solow model). The endogenous growth theory holds that policy measures can have an
impact on the long-run growth rate of an economy. Crucial importance is usually given to the
production of new technologies and human capital. The main implication of recent growth
theory is that policies which embrace openness, competition, change and innovation will
promote growth.
In reviewing the history of western growth theories we will begin with the Mercantilist
‘bullionist’ theory which states that growth was depended on the accumulation of gold
and silver and intervention of the state. As a reaction against the Mercantilists’ state
interventionist policies, the Physiocrats advocated a policy of laissez-faire, which called for
minimal government interference and believed that agriculture was the sole source of wealth
in an economy.
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However in response to the Mercantilists and Physiocrats, Adam Smith, the founder
of Classical School, says growth is rooted in the increasing division of labor in
self a regulating market system and saw the importance of manufacturing and
not agriculture in the economy. Growth, in the views of Adam Smith will eventually reach
stationary state. David Ricardo argues in his theory of “comparative advantage” that trade is
an essential component of growth but incorporated the diminishing returns to land which
limits growth faster than what Adam Smith had in mind. In contrast to the Adam Smith’s
optimism about economic growth, Thomas Malthus painted a dismal portrait in his “Essay
on the Principle of Population” which expounds the notion that economic growth is
limited when population growth which tended to increase geometrically, outstripped the
production of food resulting in general poverty. Thorstein Veblen (1899) laid the foundation
for institutionalism with his rejection of the narrow traditional economic theory that man is
motivated by self interest to a more realistic image of man who is influenced by changing
customs and institutions. The school emphasizes the role of institutions as the most
important catalyst of economic growth and development and called for an active role of
the government in the economy to correct economic inequalities. John Maynard Keynes
(1936) emerged during the Great Depression with his theory of demand-led growth and the
need for public fiscal policy to stimulate demand and spur economic growth. The influence
of entrepreneurship on technological progress in creating new products for long term
economic growth received considerable attention with the work done by Joseph
Schumpeter (1942).
In the Harrod-Domar exogenous growth model, to achieve “steady state” growth,
aggregate demand must grow at the same rate as the economy’s output capacity growth.
In this model the capital-output ratio is exogenous and therefore steady-stated growth
was therefore ‘knife-edge’ or unstable. The “neo-classical” model of growth developed by
Solow and Swan (1956) was an extension of the Harrod-Domar model which takes into
account the law of diminishing returns, technological progress and population growth as
determinants of steady state growth. The limitations of this exogenous model include its
failure to take account of entrepreneurship and strength of institutions. These limitations have
led to the development of endogenous growth theory, with emphasis on new technologies
and human capital as the engines of growth. In the endogenous model, governments can
promote growth by implementing appropriate policies. Rostow (1960) expounded the “stage
theory” and argued that it is possible to identify all societies going through five stages of
economic development: the traditional society, the preconditions for take-off, the take-off,
the drive to maturity, and the age of high mass-consumption.
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Nicholas Kaldor (1967) challenged the neo-classical theory of growth and attempted to
explain growth rate differences among developed countries. In his study, he found that the
manufacturing sector is the most dynamic sector in the economy and the ‘engine of growth’.
While the Structuralist School which lasted until 1960s was marked by a rejection of free
trade policies and state-led industrialization, the neoclassical revival in 1980s emphasized
that private markets and not government intervention as critical for economic growth
and the economic stagnation in developing countries was the result of poorly designed
economic policies. New Growth theory advanced with the importance placed on ideas to
continuously spur growth beginning with theories of economist Paul Romer in the late 1980s
and early 1990s with his economics of ideas in which he sees the importance of the interaction
between ideas, institutions, population, and human capital in economic growth and Robert E.
Lucas (1988, 1993) who believed that sustained growth can be generated through sustained
flow of new ideas, new knowledge through exchanging of ideas and ‘learning by doing’.
Robert Barro (1997) in his empirical study finds that the growth rate is enhanced by higher
initial schooling and life expectancy, lower fertility, lower government consumption, better
maintenance of the rule of law, lower inflation, and improvements in the terms of trade and
how political freedom and democracy affect growth.
BENEFITS AND COSTS OF ECONOMIC GROWTH IN WESTERN LITERATURE
Parallel to the discussion on the growth theories, arguments for and against economic growth
have also been debated by western economists.
Benefits of Economic Growth
In general, western economists believe that nothing matters more to the long-term
economic welfare of a nation than its rate of economic growth. They highlighted that higher
economic growth means improvements in living standards and lower poverty rates, rising
employment, greater business confidence, boosts tax revenues and more resources available
to invest in cleaner technologies (ADB August 2004 Report).
One of the well known proponents of economic growth is Professor Friedman (2005) in his book
The Moral Consequences of Economic Growth, who believes that growth has not only obvious
economic benefits, but moral benefits as well. He demonstrated that in developingcountries
particularly growth encourages political and social reform, allows for the possibility of
economic mobility and fairness, and provides the substance for democracy.
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Kuznets (1955) argued, based on experiences largely before World War II, that there is
an increase in inequality in the early stages of development but in the later stages of
growth, income inequalitydecreases resulting and eventually growth would bring more
social justice. Arthur Lewis, another Nobel economist, went further to argue that greater
inequality is necessary to generate the savings that growth requires.
The World Bank reported that global income inequality is in fact diminishing and global
poverty is reducing rapidly due to economic growth. One of the most popular arguments
against limiting growth is that we need more growth in order to be rich enough to afford
the costs of cleaning up pollution and discovering new resources (Neil Jacoby, 1970). Yale
economist Henry Wallich (1972) makes a similar point by arguing that the environment will
also be better taken care of if the economy grows.
Costs of Economic Growth
Nevertheless growth has had its critics among western economists and discussions on
sustainable growth began to appear in recent years. There is a well-developed literature
concerned with, among other things, the impact of growth on the environment and
poverty. They have in general highlighted the negative effects of growth which include
the deterioration in quality of life due to pollution, encourage consumerism, inequality of
income, inflation risks, the environment, regional disparities, and long term sustainability of
economic growth due to rapid depletion of finite resources.
Professor of Economics at the London School of Economics, J. Mishan (1967, 1977) in his
book The Costs of Economic Growth argues that the pursuit of economic growth in the
past had resulted in social and environmental degradation and a decline in human welfare.
He stated the issues of acid rain, the greenhouse effect, the destruction of the rainforests,
worldwide pollution and land and sea, traffic blight, hedonism, crimes and conflicts of the
permissive society as costs of growth. In 1972 a book called The Limits to Growth which
was compiled by The Club of Rom consisting of a team of experts from the U.S. and several
foreign countries analyzed the consequences of a rapidly growing world population and finite
resource supplies. Using system dynamics theory and a computer model called “World3”,
they predicted that the limited to economic growth is inevitable.
Herman Daly (1997) in his refutation of the popular support for unceasing growth argues that
the richer the society (the more it has grown in the past); the more likely it is that marginal
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benefits are below marginal costs and that further growth is uneconomic Robinson
(1972) explains that not only subjective poverty is never overcome by growth, but
absolute poverty is increased by it. E.F. Schumacher (1973) and Kenneth Boulding (1966)
wrote about the environmental effects of economic growth and suggesting alternative
models to the neoclassical growth paradigm. Hamilton (2002) casts doubts on the
benefits of economic growth, focusing on problems such as environmental degradation,
unhappiness and inequality and argues against what he sees as a contemporary obsession
with economic growth. Goodland (1992) pointed out that global warming, ozone hole,
widespread land degradation, declining biodiversity and high rate of appropriation of the
net primary product of terrestrial photosynthesis by humankind are evidences that there is a
limit to economic growth.
Ivan Illich (1975) examines the notion of “counter productivity” of growth where growth brings
diminishing benefits but causes undiminished social and environmental costs. Siegel (2006)
in the End of Economic Growth says that ‘as people become more prosperous, they move from
buying necessities to buying conveniences to buying luxuries. Eventually, they reach a point
where consuming more brings trivial benefits. At this point, the basic food that people buy is
still necessary, most products that they buy are still useful, but these final “improvement” in their
standard of living do not increase their well being significantly. Yet growth creates the same social
and environmental costs, whether or not the products are useful’.
It is due to the negative side effects of continuous economic growth that the terms
‘sustainable development’ and ‘human development’ are now being extensively used.
Due to importance of sustainable growth, a report The World Conservation Strategy
(1980) emphasizes ‘sustainable development’ as a public policy was published, The World
Commission on Environment and Development (WCED) ‘to improve well-being in the
short-term without threatening the local and global environment in the long term’ was
appointed in 1987, Agenda 21, the Rio Declaration on Environment and Development, and
the Statement of principles for the Sustainable Management of Forests was adopted, and
in 2001, the European Council at Goteborg discussed “A Sustainable Europe for a better
world: A European Strategy for Sustainable Development”, proposed by the European
Commission. The Human Development Report (HDR) was launched in 1990 to place people
back at the center of the development process and to assess the level of people’s long-term
well-being by introducing the Human Development Index, the Gender-related Development
Index, The Gender Empowerment Measure, and the Human Poverty Index.
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The Index of Sustainable Economic Welfare (ISEW) and the Genuine Progress Indicator
(GPI) consider the impact of economic activity on the environment. Due to his work on the
Human Development Index and economics of famine that Amrtya Sen was awarded the
Nobel Prize in Economics in 1988.
Based on the above brief literature review of western economic growth theories, it is clear that
these growth theories and the benefits and costs to economic growth debated in western
economics however advanced they may have been are not integrated and due to these they
are unable to explain the underlying causes and costs of economic growth. What we need is
a systemic theory to explain the causes and costs of economic growth which Ibn Khaldun has
propounded in a coherent and cogent manner in his magnum opus, The Muqaddimah.
THE KHALDUNIAN MIND AND HIS ECONOMIC METHODOLOGY
In order to understand his views on causes and costs of economic growth, it is necessary
to understand how he views the world. The Khaldunian mind perceives the world as a
cosmic order consisting of laws of God that operate within every part of the universe. Ibn
Khaldun recognizes the principles of causality where there is a cause and effect relationship
between events (Khaldun, 195). His social scientific inquiry on the causes of the rise and fall
of nations from which he derives his understanding on the causes and costs of economic
growth is consistent with his perception of the world. In order to understand the cause and
effect relationship in economic phenomena he seeks to derive economic laws and principles
using the inductive and deductive reasoning. Ibn Khaldun recognizes the spiritual
influences on the world of existence (Khaldun, 195). The Khaldunian mind is holistic and
interdisciplinary and look at events as a manifestation of the interrelationships between
economic, social, psychological, religious and political factors. He uses religious texts, logical
reasoning, historical facts and empirical observation to explain economic problems and
phenomena during his times and proof his economic propositions. This method he employs
is consistent with his concept of external and internal meaning of history in which he observes
and discovers patterns or general laws to explain why historical events occur (Khaldun, 7).
THEORY OF MAN AND SOCIETY
Ibn Khaldun’s theory of man and society also influence his views on causes and costs of
economic growth. He begins his analysis by referring to human nature in the development of
human society and civilization. He contends that God gives man the power in the form of
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the ability to think not only to achieve the necessary requirements of life, which is a means,
but also further than that to fulfill a higher goal to perform his role as His representative on
earth (Khaldun, 91). It is due to the ability to think or the intellect which enables man, through
the thinking process of knowing the cause or reason, to act in a well arrange and orderly
manner and brings about the development of crafts and sciences (Khaldun, 414). This makes
man a rational being.
Man has the natural tendency of aggressiveness and association and thus he requires
cooperation among his fellow men to obtain food and defense for survival and therefore
man is gregarious. Society comes into being as a consequence of human desire to obtain
basic requirements of life. In order words since man is a social and economic being, society
comes into being. However, a society requires a binding force that strengthens it. In Ibn
Khaldun’s views that binding force is the group feeling or what is commonly known as
esprit de corps. He further argues that as a result of the aggressive nature of man and
the human desire for survival, it also provides the justification for someone to act as a
restraining influence. In this sense Ibn Khaldun combines the social character of man with
the need for an authority to ensure cooperation, law and order (Khaldun, 284). He sees the
primary role of a ruler to ensure ‘that man does what is good and avoids what is harmful’
(Khaldun, 473).
In Ibn Khaldun’s thought, man is also a physical being and therefore the physical
environment and the food he consumes inevitably affect him. In fact, Ibn Khaldun brilliantly
explicates the relationships between climates, geographical locations and food and their
influences on human conduct. All these qualities in man as a economic, rational, political,
physical and religious being are transformed from potentiality to actuality when man is in
contact with specific circumstances or conditions.
Ibn Khaldun’s theories of man and society shows a cyclic process through the interplay
of human nature, reason, habits and customs which leads to the transformation from the
primitive to the sedentary culture and eventually to decay and senility of civilizations.
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Societies and organizations to Ibn Khaldun, behave like an organism growing through the
stages of birth, growth, peak, decline and death.
Stages
Peak
Growth
Decline
Dissolution
Origin
Time
He believes that the growth and decline of organizations, societies and civilizations is cyclical
in the sense that a society will pass through similar stages and finally it will be replaced by a
new one and the cycle then repeats itself.
Birth of New
Organization
Growth
Dissolution
Decline
Peak
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HUMAN NATURE AND ECONOMIC GROWTH
Ibn Khaldun’s theory of economic growth is based on his theory of man and society
integrated within the Islamic Weltanschauung (Khaldun, 311). Human nature in the view
of Ibn Khaldun, influences social evolution and change, politics, economics, education,
development of knowledge and sciences, emergence of cities and towns, states and
governments.
Due to his ability to think as well as his natural desire for food, man requires cooperation from
other human beings and also needs leadership. This cooperation and leadership results in
division of labor and specialization not only in bringing about the attainment of sufficient
necessities but also creates economic surplus, generates wealth and spur growth (Khaldun,
80-90, 271-272). In explaining labor as a source of economic growth, he also expounds the
labor theory of value and the derived demand for labor (Khaldun, 272, 314).
‘When population increases, the available labor again increases. In turn, luxury again increases
in correspondence with the increasing profit, and the customs and needs of luxury increase.
Crafts are created to obtain luxury products. The value realized from them increases, and, as
a result, profits are again multiplied in the town. Production there is thriving even more than
before. And so it goes with the second and third increase. All the additional labor serves luxury
and wealth, in contrast to the original labor that served the necessity of life’. (Khaldun, 272
-273).
He expounds that output production requires a production process, labor and also capital
goods. In this sense he anticipates Adam Smith in discussing labor as a source of economic
growth. Ibn Khadun believes that man’s faculty of reason, his need for basic necessities
and authority, and his economic ways of making a living and social organization are initial
conditions for economic growth and development (Khadun, 84-85, 249-250). Labor is in fact
a source of profit and capital accumulation (Khaldun, 313).
Since man’s needs and wants evolve from necessities to luxury it leads to the emergence
of two different societies namely the hard living Bedouin society with the features of rural
culture and the easy and affluent living of the sedentary society having the characteristics
of city dwellers in which the former stage is prior to the latter (Khaldun, 250, 308-309) which
anticipated Rostow’s stages of growth model. He tells us that the sedentary culture is not
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INAUGURAL PROFESSORIAL LECTURE SERIES 2010
solely a culture of affluence but the presence of myriad economic activities and businesses
that thrive, the various kinds of job opportunities available and the required skills to
perform these economic functions which spur economic growth (Khaldun, 286-287). In
fact Ibn Khaldun argues that the desire for pleasure and ease by the rural dwellers causes
migration from the hard living of the rural society resulting in growth of cities and towns and
the emergence of luxury habits and customs of the sedentary culture (Khaldun, 236). Again
Ibn Khaldun anticipates the ideas of Adam Smith not only in the aspects of subsistence
being prior to luxury but also in explaining the causes of the growth of cities (see Rosenberg,
Nathan, Adam Smith, Consumer Tastes and Economic Growth, Journal of Political Economy,
Vol. 76, Issue 3, May-June 1968).
Ibn Khaldun considers the sedentary urban culture with all its pomp, ostentation, luxuries,
elegance and eventually its subservience to desires as a beginning of a decline in human
civilization (Khaldun, 291-292). He says that according to reason and experience a
civilization progresses from the Bedouin, desert or rural to the urban or sedentary culture
and eventually reaches its limit of growth. Agriculture to Ibn Khaldun is innately natural and
since it is prior to the sedentary culture, is much more rampant in the rural society while
commerce and other forms of crafts flourish in the sedentary society (Khaldun, 356-357,
337-338, 316-317, 336). It is human nature which desires necessities, comforts and luxuries,
progress and prosperity and together with the human mind and the different levels
of thinking processes brings about growth and development of cities and nations,
advancement of knowledge, skills and technology (Khaldun, 84, 253-253, 357-362,414-415,
434, 436).
IBN KHALDUN AND THE RELATIONSHIP BETWEEN GOVERNMENT, ECONOMIC
FREEDOM AND ECONOMIC GROWTH
One of the most important contributions of Ibn Khaldun to theory of economic growth is
his ideas on the role of government and public policies. He considers economic freedom
as a necessary condition to spur growth and increase government revenue As highlighted
earlier division of labor and presence of economic surplus results in the production of
conveniences and luxuries, which increases income and spurs economic growth. However
with the emergence of absolute power and authority and comes with it luxury and
prosperity, spending increases leading to extravagance within the political leadership and
the masses, especially among the urban population, and resulted in the demand for higher
wages (Khaldun, 123).
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16
In order to finance the conspicuous spending habits leading to insufficient tax revenue and
deficit budget, the government with its absolute authority and power impose bad public
policies which Ibn Khaldun believes curb economic freedom, reduce private investment
causing economic contraction and decline in public revenue (Khaldun, 91-92). He analyses
the effects of these public policies in the form of higher taxes, imposition of different kinds of
taxes, government involvement in business and forced sales and pricing (Ibn Khaldun, 123)
on economic growth. Higher taxes impose by the government will reduce business profits
and motivation among private enterprises and may eventually cause them to exit from
the market if they experience capital loss (Khaldun, 110) which reduce production causing
economic contraction.
Ibn Khaldun also considers it is harmful for the government to be involved in commerce
even for the purpose of raising revenues as it will result in unfair competition with private
enterprises which will discourage private commercial and entrepreneurial activities resulting
in a slowdown in economic growth. Although the aim of the government to be involved in
business activities is to raise revenue, it has failed to create an unfriendly business environment
for the private enterprises to flourish which causes its revenue to decline (Khaldun, 95).
Ibn Khaldun’s public policy favors private production and enterprises (Khaldun, 93-94, 109
-110). Although Ibn Khaldun is concerned with the negative ramifications of overspending
by the government on the economy, he is equally concerned with the impact of lower
spending on economic growth and tax revenue. He explains why a policy decision by the
government to reduce public spending can result in slower growth. When government
reduces spending it reduces aggregate demand and affects business profit expectations,
lowers production and reduces income for businesses and individuals. He sees one of the
causes of recession is the decline in government spending (Khaldun, 102-103). Ibn Khaldun
considers a good government which is benevolent, just and prudent as an incentive
for business activities and the economy to grow (Khaldun, 135, 118-119, 122-123). Ibn
Khaldun’s analysis appears to suggest that political leadership through the introduction of
business friendly policies can enhance motivation through private ownership rights, low
taxes and freedom of exchange which contribute to economic growth and prosperity. Ibn
Khaldun considers finance as one of the critical factors for nation building but he considers
its insufficiency or excessive indulgence as the cause of disintegration of a nation and
government due to rampant corruption (Khaldun, 122-123, 296-297). In his analysis he finds
that initially the presence of a benevolent and just government, the practice of traditional
culture and religious principles increase the level of population as people are attracted to it.
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At this stage business flourishes with the government achieving high level of revenue from
taxes and having surplus budget due to prudent practices and praiseworthy qualities.
However, as the government grows and become prosperous, these prudent observances
and attitudes decline which bring about excessive spending and blameworthy qualities.
The government then introduces higher taxes to cope with the deficit budget (Khaldun,
91-92).
Ibn Khaldun suggests public policies that can improve government revenue and their
financial position. He prefers the introduction of fiscal policy which is inclined towards
moderate taxes and moderate government spending to spur economic growth and
increase revenue. Similar to Keynes, Ibn Khaldun’s emphasis is on the potential of
government spending and taxation to influence aggregate demand. Even empirical
evidence and economic theory shows that there is a negative correlation between size of
government spending and economic growth.
He suggests that financial position of the government can be improved not by increasing
tax revenue but by increasing the tax base. Business friendly policies that include fairness
and justice, fair competition, free trade, private property rights and freedom of economic
activities allow business of flourish, business profit expectations to grow creating the
incentive for profit and capital accumulation. When business activities expand, they
increases tax base. This, in turn, increases the ruler’s revenues (Khaldun, 95-96). The policies
he recommended to promote growth are those that give equitable treatment to people
and encourage and motivate business activities such as fairness, free competition and free
trade, protection of private property, rather than imposing excessive taxes, government
involvement in business, infringement of private property and restriction to economic
freedom, so that people earn profit through their own effort which enhances their
motivation and incentive to produce and work for their livelihood. Ibn Khaldun’s analysis
emphasizes the importance of the institution of private property to promote growth.
IBN KHALDUN AND THE RELATIONSHIP BETWEEN RELIGION AND ECONOMIC
GROWTH
Ibn Khaldun opines that religion strengthens group feeling or solidarity as it creates good
qualities in man and brings members of a group to a shared and common vision. It reduces
the tendency towards self interest and other blameworthy qualities which may cause
disunity and conflicts and eventually, political and economic decline (Khaldun, 319-320).
INAUGURAL PROFESSORIAL LECTURE SERIES 2010
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Ibn Khaldun studies the relationship between religion, government policies and economic
growth. Injustice to Ibn Khaldun is contrary to religion and it can result in economic
contraction (Khaldun, 107). Religion, says Ibn Khaldun, prohibits unjust policies and thus
provides incentives for business activities, creates growth and increase tax revenue. He
understands that as a result of the disincentives to engage in businesses due to these
unjust policies, there will be a contraction of production resulting in unemployment which
eventually leads to migration and a decline in population and economic growth (Khaldun,
104, 107-109). This makes his concern for property rights significant because it is not just
a matter of ensuring people’s property rights and economic freedom are not violated but
due to the existence of the relationship between religion, individual rights and economic
growth. Therefore Ibn Khaldun is unambiguous and unequivocal in his assertion that
religion promotes justice by prohibiting unfair and unjust public policies by the
government. He sees clearly the positive relationship between religion, economic justice,
business motivation, economic growth and tax revenue. Due to the expansion of economic
activities as a result of religiously permissible public policies, employment opportunities
increase attracting people to the city causing population to increase which further spur
economic growth. It is the contention of this study that Ibn Khaldun is the first economist to
relate religious injunctions with economic justice, economic growth and development, tax
revenue and population growth.
To Ibn Khaldun, religion influences public policies which are conducive for business
activities to flourish, provides economic freedom and macroeconomic stability through
work incentives and motivation (Khaldun, 103). Ibn Khaldun proposes the government
introduce business friendly public policies which are also compatible with religion such as
safeguard private property rights and economic freedom to create incentive to do work and
cause proliferation of business activities to boost the economy and public revenue. He cites
evidence in history to show that when a government introduces bad policies it causes social
and economic conditions of the city to deteriorate and when the government reverses the
policy and institute justice, the city becomes prosperous (Khaldun, 104 -105).
Ibn Khaldun is of the opinion that when civilized man achieves luxury and prosperity
living in the urban culture it becomes a habit. They then become addicted to conspicuous
spending, the pursuit for material wealth, and the gratification of desires. Their soul
becomes accustomed to ease and pleasure and they later become greedy and uncivilized.
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Religion and solidarity are no longer important to them as the habits and customs of luxury
cause them to seek ways which are immoral and unethical to satisfy more or their desires
and want for their own self interest and not for the common good. Their expenditures
become extravagant and they are more concerned with physical appearances resulting
in some of them becoming poor and indigent while others become corrupted in their
behaviors. He explains corruption as the outcome of three interrelated factors and defines it
as unethical practices of making a living and these bad qualities become traits of character
and habits for most of the urban people. The indulgence of luxury and pleasure among
the urban sedentary people also leads to adultery and homosexuality which destroys the
foundation of family life and result in lower population growth (Khaldun, 291-297).
IBN KHALDUN AND THE RELATIONSHIP BETWEEN EDUCATION, IDEAS AND
ECONOMIC GROWTH
Ibn Khaldun sees the significance of education and constant practice or learning by doing in
providing the necessary skills and knowledge for man to engage in economic activities and
fulfilling human needs and wants. With continuous exposure and experience in the
production of goods due to the increase in demand, quality of human capital improves which
produce new ideas, innovation and new technology.
He states the relationship between repetition, habits and development of skills and technology
and quality of goods. (Khaldun, 342-347). He says the reason why there is a disparity between
people of different regions, cities and nations in terms of their skills and economic conditions
is due to good practices in education and level of experience in an economic activity (Khaldun,
431-433). This result in higher production of goods, spur business activities and economic
growth. In fact he goes further by saying that as a result of all these economic exchanges and
interaction human intellect develops and new scientific disciplines emerge (Khaldun,
346-348, 406-407). He traces the development and evolution of the various industries, skills
and economic activities known to man during his time and how transformation occurred
in theses industries as new ideas and technology were gradually introduced (Khaldun,
347-405). Ibn Khaldun therefore considers ideas and human capital as important for
economic growth and in the development of societies and civilizations.
INAUGURAL PROFESSORIAL LECTURE SERIES 2010
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IBN KHALDUN AND THE RELATIONSHIP BETWEEN POPULATION AND
ECONOMIC GROWTH
In his three stage theory of the growth of a city he indicates the relationship between
population growth, level of economic growth, labor demand and supply, skills and the
quality and quantity of other inputs and the level of technology (Khaldun, 270-271). He
suggests that the size of population and thus supply of labor between cities and nations is
the cause of the difference in economic growth and income. Ibn Khaldun also postulates
that the difference in population cause income differentials among similar occupations
between cities and nations due to the difference in demand for them. The higher demand
for labor in cities and nations with higher population is due to the higher demand for goods
and services (Khaldun, 272-273, 277). This will cause businesses and trade to flourish. Cities
and nations with higher population will have higher economic growth and income due
to the higher supply and quality of labor and with the multiplier effect; income increases
further (Khaldun, 272-273, 280-283, 314-315, 348-349).
He cites examples of nations such Egypt, Syria, China and India where as a result of increase
in population, there were expansion of commercial activities there resulting in economic
growth and prosperity. He refutes the contention that gold and silver are the source of
economic growth and prosperity which was exactly the view of the mercantilists, and
reiterate that it is due to the higher population size (Khaldun, 281-282). Ibn Khaldun sees
population growth as the cause and effect of economic growth.
IBN KHALDUN AND THE RELATIONSHIP BETWEEN INTERNATIONAL TRADE
AND ECONOMIC GROWTH
Ibn Khaldun also explains the benefits of free trade. Besides local trade, Ibn Khaldun
elucidates the importance of international trade to increase profit and economic growth. He
cites examples where this had taken place.
‘Consider, as an example, the lands of the East, such as Egypt, Syria, Persia, India, or China: or
the lands of the North of the Mediterranean. Because of social life is flourishing there, notice
how wealth has increased, the state has grown stronger, towns have multiplied, trade has
prospered, conditions have improve. For prosperity and luxury (goods) we see in the Christians
traders who come in North Africa passes description. The same is true of the traders who come
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INAUGURAL PROFESSORIAL LECTURE SERIES 2010
from the East, and still more those who come from the Far East, such as Persia, India and China,
description of whose wealth and prosperity are often dismissed as untrue ….’ ‘Or, the merchant
may transport his goods to another country where they are more in demand than his own, where
he bought them. This will bring a large profit’ …And we notice that the inhabitants of these
countries bring all their goods for purpose of trade’ (Khaldun, 336-337).
He mentions that a good global trader can benefit from free trade to increase its profits by
employing three strategies. Firstly, export goods that are generally needed and have large
demand. Secondly, the goods are not demanded solely by the wealthy class which is high in
terms of prices and low in terms of demand. Thirdly, seek new markets even though it may
be riskier because it will bring about higher profits (Khaldun, 337).
A nation with surplus labor will produce excess goods and export these goods which are
required by other nations and import those goods which they need from nations which have
surplus resources to produce them. These nations can benefit by specializing according to
their comparative advantage and achieve higher economic growth.
‘If the labor or the inhabitants of a town or city is distributed in accordance with necessities and
needs of those inhabitants, a minimum of the labor will suffice. The labor (available) is more
than is needed. Consequently, it is spent to provide the conditions and customs of luxury and to
satisfy the needs of the inhabitants of other cities. They import (the things they need) from people
who have surplus through exchange or purchase. Thus, the people who have surplus get a good
deal of wealth’. ‘If a particular craft is in demand and there are buyers for it, that craft, then,
corresponds to a type of goods that is in great demand are imported for sale. People in towns,
therefore are eager to learn that craft, in order to make a living through it’. (Khaldun, 273).
IBN KHALDUN AND THE RELATIONSHIP BETWEEN TAX RATES AND TAX REVENUE
Ibn Khaldun analyses the economic consequences of tax policies of the government and
shows that increase in taxes on the individuals and the businesses although initially lead
towards higher tax revenue eventually becomes counterproductive to work incentives and
businesses, slowing down the economy and causing a decline in tax revenue. Ibn Khaldun
attributes the decline in economic growth to the decline in tax base due to the decrease
in commercial activities as a result of lower motivation when taxes are increased beyond a
certain level.
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‘It should be known that at the beginning of the dynasty, taxation yields a large revenue from
small assessments. At the end of the dynasty, taxation yields a small revenue from large
assessments’ (Khaldun, 89).
Ibn Khaldun explains the relationship between level of taxes and motivation to work and the
desire to engage in business activities. He elucidates the effects of taxes on the behavior of
individuals. Ibn Khaldun seems to suggest that higher taxes reduce the size of the tax base
through both labor supply and growth rate effects. Ibn Khaldun believes lower taxes creates
an environment conducive for labor supply to increase, businesses to grow and prosper
with sufficient profit, increase output resulting in economic growth and higher tax revenue
(Khaldun, 89, 90).
‘If (the reader) understand this, he will realize that the strongest incentive for a commercial
activity is to lower as much as possible the amounts of individual imposts levied upon persons
capable of undertaking cultural enterprises. In this manner such persons will be psychologically
disposed to undertake them because they can be confident of making a profit from them’ (Khaldun,
91).
In modern terms the analysis of Ibn Khaldun is inherent in what is called the Laffer Curve
named after Arthur Laffer, the American Economist said to be the first to introduce it in
1970s. This analysis of Ibn Khaldun resembles what we understand to be the views of
Supply-Side economists which concentrate on the ways in which government actions can
affect incentives for private citizens to work, save, and invest. Part of this new approach was
the Laffer Curve which demonstrates the relationship between tax rates and tax revenue
by government. However, this study asserts that Ibn Khaldun is the precursor of this
relationship six centuries earlier and it is appropriate for it to be known as the Khaldun’s curve.
Arthur Laffer himself admitted that it was Ibn Khaldun who first introduced this idea (Laffer,
2004). Laffer attempted to proof the validity of this theory by citing examples in US history:
‘During the 20th century, the U.S. had three major periods of tax-rate cuts: the Harding/ Coolidge
cuts of the mid-1920s, the Kennedy cuts of the mid-1960s, and the Reagan cuts of the early 1980s.
Each of these periods of tax cuts was remarkably successful in terms of virtually any public policy
metric’ (Arthur, Laffer, The Lafer Curve, Thinking Economically).
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INAUGURAL PROFESSORIAL LECTURE SERIES 2010
Relationship between Tax rates and Tax revenue
(taken from http://finxknowledgeatcbsdu.wordpress.com/2008/03/12/laffer-curve-inside-out/)
100%
A*
Tax Rates
Prohibitive
Range
A
0%
The
Laffer
Curve
Even John Maynard Keynes support low taxes (John Maynard Keynes, The Collected
Writings of John Maynard Kaynes. London: Macmillan, Cambridge University Press, 1972).
Keynesian economists suggest that an increased government deficit resulting from a tax cut
will stimulate output and income.
A 2009 study by Harvard economists suggest that taxes and spending should be cut to
spur economic growth and reduce deficits (Alberto Alesina and Silvia Ardagna, 2009). They
argued that fiscal stimuli based upon tax cuts are more likely to increase growth than those
based upon spending increases.
INAUGURAL PROFESSORIAL LECTURE SERIES 2010
24
The study concludes: ‘As we argued in the introduction it is unlikely that these deficits and debt
will disappear simply because growth will resume at very rapid pace very soon. Primary suppresses
would be needed since interest rates cannot go other than up from the close to zero actual levels.
The analysis of the present paper suggests that primary spending needs to be kept under tight
control otherwise increasing taxes running after ever increasing spending will not work.’
COSTS OF ECONOMIC GROWTH
Ibn Khaldun discusses the limits to growth when he relates economic growth with the
emergence of social and economic costs. He says that economic growth, although it may
result in progress and prosperity, may lead to environmental degradation, congestion,
epidemic diseases, inflation, unemployment, poverty, moral decline and corruption. In other
words Ibn Khaldun sees both the benefits and costs of progress. In his study he mentions the
price of success in terms of environmental degradation and diseases and finally introduces
policy recommendations to deal with the problem.
He explains why there is a limit to population growth and therefore economic growth
because economic growth depends on the size of population (Khaldun, 135). Nations
and societies progress in stages of economic development and growth, and population
increase over time and become abundant and this occurs gradually. Eventually population
and economic growth reach their limits. Based on his observations of social realities and
historical facts, he believes in the organismic nature of society, city, nation, economic
growth, political leadership, dynasties which have a life cycle of their own, going through
the stages of origin, growth, decline and dissolution (Prakash, 1990) similar to the life of any
individual organism which goes through the stages of birth, growth, maturity, old age and
death. His analysis on the costs of economic growth begins with the presence of a good
government and low taxes which provide incentives for business activities attracting
people into the city or nation resulting in immigration and population growth (Khaldun, 135
-137).
The ingenuity in Ibn Khaldun’s analysis is his understanding that the increase in population
engenders environmental degradation and reduces the overall quality of life of the people
despite the fact that empirical studies to establish such a relationship have never been done
before or during his time.
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INAUGURAL PROFESSORIAL LECTURE SERIES 2010
The limit to growth coincides with the instability of political leadership or government,
decrease in revenues, famines and pestilences deterioration in the quality of life. He
explains the reasons for famines because people refrain from cultivating land due to the
lack of motivation as a result of unjust public policies including higher taxes resulting in
increase in prices (Khaldun, 136). He further explains the existence of pestilences, which
is related to famines, political instability and plagues. Plagues occur when the air gets
polluted due to over crowdedness when a city or a nation experiences economic
growth and along with it population growth (Khaldun, 136-137). Ibn Khaldun himself
had experienced during his adolescence a pandemic, a great plague referred to as the
Black Death in 1348-1349, resulting in the loss of his parent and teachers. Therefore it is
reasonable that he understands and able to provide explanation on the causes of plagues.
His policy recommendation to mitigate this environmental crises which he says, is based
on scientific approach to reduce plague, air pollution and diseases during his time is to
provide empty space interspersed between urban areas in order to improve circulation of
air and removes air pollution (Khaldun, 137). Ibn Khaldun, therefore, discusses about the
price of success and the costs of population and economic growth which is inevitable when
a country or a city moves from the lower to a higher stage of economic development and as
the standard of living rises.
An extensive amount of researches and studies have appeared in contemporary literature
as highlighted in the previous sections of this lecture that provide ample evidence on the
truth of what Ibn Khaldun says as to the limit of growth and consequences of incessant
progress and as … ‘people become more prosperous, they move from consuming necessities
to conveniences to luxuries. Eventually, they reach a point where consuming more brings trivial
benefits …’ (Seigel, 2006).
Therefore, it is clear that Ibn Khaldun’s analysis on the adverse effects of rapidly growing
population on the environment and health has contemporary relevance and is consistent
with the findings of recent scientific studies and research. He also suggests that economic
growth may cause inflation, unemployment and poverty which result in the overall decline
in the spiritual and material well being of a society (Khaldun, 137).
Population growth initially causes betterment and improvement of quality in all kinds of
things. Besides the diversification of luxuries, the characteristics of a city with sedentary
culture and large population are high prices due to high demand and taxes impose by the
government to cope with its excessive spending. Small businessmen and merchants
INAUGURAL PROFESSORIAL LECTURE SERIES 2010
26
include in the price of their goods and merchandise, customs tax and other personal
expenses that raises that price further. Thus growth in the cities leads to inflationary
pressure on prices of goods (Khaldun, 137).
Due to the high prices, expenditure of urban residents grows until it reaches an excessive
level. Since expenditure becomes extravagant, the incomes and profit obtained becomes
inadequate. This makes them indigent. He defines what poverty is which he says happens
when expenditure exceeds income as a result of economic prosperity and growth and the
habits of luxury. This is what he attempts to explain on the limits of growth. At the initial
stage, a city or nation achieves sustainable economic growth, but with higher prices due to
taxes and other items included in the sales prices, expenditure exceeds income and profit
which eventually leads to poverty. Poverty becomes widespread and rampant, demand
and consumption of goods fall, causing business activities and production to decline. Ibn
Khaldun attempts to show how continuous prosperity and excessive luxury eventually
propels the nation or city towards economic contraction (Khaldun, 293). He says with
the prevalence of poverty and high level of unemployment in a city, people began to
adopt blameworthy qualities such as corruption as ‘a result of painful and trying efforts
to satisfy the needs caused by their (luxury) customs, the result of the bad qualities they have
acquired in the process of obtaining (those needs), and of the damage to soul suffers after it has
obtained them, through acquiring (still) another (bad luxury) quality’ (Khaldun, 293).
As a result of these conditions and corruption in the form of commercial crimes which
become rampant, as well as indecency and immoral behavior among members of the
society including the youth, these situations cause emigration, population decline and
therefore economic growth becomes unsustainable (Khaldun, 295). It is the aspect of the
urban culture and the negative ramifications it causes, which makes Ibn Khaldun praise the
qualities of desert-rural people although in terms of economic progress and affluence and
the higher standard of living it brings he is in favor of the sedentary-urban people (Khaldun,
297).
Based on the preceding discussion it is clear that Ibn Khaldun had written a comprehensive
treatise on the role of political leadership, religion and motivation to spur economic growth
and prosperity which eventually leads to population growth and the presence of economic
and social costs. Ibn Khaldun seems to suggest the limit to growth and therefore growth is not
sustainable as it will lead to social and economic costs which result in the decline in the quality of
life. The economy cannot continue to grow forever without causing some harm to man, society
and the environment. It cannot continue to grow without overheating leading to economic
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INAUGURAL PROFESSORIAL LECTURE SERIES 2010
crisis and business cycles. Although he had derived general economic laws and propositions
governing the cyclic process of economic growth and decline based on his study of history
he had provided us with recommendations to avoid the economic downturn and the
political and social malaise associated with it by looking at the factors that determine the
economic growth and decline of cities and nations.
CONCLUSION
Ibn Khaldun believes that the root cause of this limit to economic growth is when man
changes and is transformed from being benevolence, having a high level of morality and
seeking common good which creates good and prudent government resulting in higher
population and economic growth and prosperity, to man who is selfish, immoral and greedy
resulting in excessive spending and unjust public policies and together with the emergence
of social and economic costs cause the population and the economy to decline.
What is obvious is that the change is caused by the change in culture and economic
conditions of man. However to Ibn Khaldun, the economy will experience growth again
when there is a new group of people with good political leadership, religious virtues and the
spirit of solidarity govern the city or nation and instituting good public policies (Khaldun,
320-322, 353-355, 125-126).
Greedy, self interest and immorality, the outcome of easy living and pleasure, luxury
habits and conspicuous consumption which are the traits of urban man highlighted in Ibn
Khaldun seems to be the root cause for economic problems in the world today including
the Asian economic crisis in 1997-1998 (read the statement by Paul Volcker (1999), former
Chairman of the Federal Reserve Board) and the 2008 global financial crises (read the
statement by Barack Obama in his speech at George Mason University in Fairfax, Va).
Ibn Khaldun’s limit to growth is consistent with the 18th century Malthusianism debate
and 1972 Club of Rome study on the Limits to Growth, with what Herman Daly called the
uneconomic growth and counterproductively to growth introduced by Ivan Illich. Ibn
Khaldun theory of economic growth is a blend of the Classical and New growth theories and
the concerns on the costs of economic growth expounded by western economists as well as
the role of religion in promoting economic growth. Public policy makers have to revisit the
obsolete mainstream economic paradigms as panacea to the present economic problems
and consider a new economic paradigm or model which is based on a systemic change as
propounded by Ibn Khaldun, six centuries earlier.
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REFERENCES
Ibn Khaldun. The Muqaddimah. (Rosenthal, Franz, Trans). New York: Pantheon Books. 1958.
Syed Omar, Agil (2008). The Muqaddimah of Ibn Khaldun: Religion, Human Nature and
Economics. Selangor International Islamic University College.
Siegel, Charles (2006). The End of Economic Growth. Preservation Institute, Berkeley.
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