ABSTRACT

In terms of achievement, Muslims in the world are far from the Quranic injunction that they are the best of peoples evolved for mankind, enjoining what is right and forbidding what is wrong and believing in Allah. The study intends to explain why this is so. Using the Islamic perspective of knowledge that every phenomenon has a divine as well as a scientific dimension and taking the Indonesian five- year development plans and their implementation as a case , the study finds that the failure of Muslims to reach their  potential is because the Muslim countries, basing their  planning  on neo-classical economic concepts,  employed management paradigms of individualism and materialism,  in managing their development . The individualistic approach provides fertile ground for Arrows paradox to reign in the management system, foreclosing  coordination and consultation.  Coupled with operational materialistic ideology of economic growth with emphasis on the use of physical capital, the twin ideology of individualism and materialism effectively prevented the fuller utilization of human resources, with negative consequences on the achievement of sustainable  development objectives especially productive employment .Muslim countries should abandon materialism and individualism as operational ideologies in managing their development.

Keywords:  Neoclassical Economics, Individualism, Materialism, Development

INTRODUCTION

While there may be differences  in the level of human achievement of Islamic countries in the contemporary world, generally speaking such achievement  is far from what is appropriately required of them in accordance with the Quranic injunction of Surah Ali Imran 110  “Ye are the best of peoples evolved for mankind, enjoining what is right,forbidding what is wrong, and believing in Allah.  No Muslim country in the world, large or small,  has ever achieved anything near what is achieved by the industrialized non-Muslim countries in terms of human development index or technology achievement.An important indication of this achievement, although far from perfect, is the human development index developed by the United Nation Development Program (UNDP). The highest human development index achieved by an Islamic country, according to the Human Development Report 2005,  was 33 by Brunei Darussalam out of 177 countries in the world. Larger Muslim countries like Malaysia, Saudi Arabia, Turkey, Indonesia, Pakistan and Bangladesh are left far behind .The last three are respectively number 110, 135 and 139. Position number one in human development index was achieved by Norway. The relatively low position in human development index reflects lower achievement in health and education. In Pakistan, for example, life expectancy at birth was 63 versus 79.4 in Norway, combined gross enrolment ratio was 35%  versus 101 % in Norway  and GDP per capita of US $ 2097  versus US $ 37.670 in Norway. ( UNDP., 219-223 ).  A large number of Muslims are mired in grinding poverty with income below US$ 1 per day. Using US$ 1 per day per capita as the poverty line, in the period 1990-2003, 7.5 % of the population in Indonesia, 3.1 % in Egypt, 13.4 % in Pakistan and 35 % in Bangladesh were below the poverty line. When the poverty line is increased to US$ 2, the proportion of the population below the poverty line increases substantially, with Malaysia 9.3 %, Turkey 10.3 %, Indonesia 52.4 %, Pakistan 65.6 % and Bangladesh 82.8 % (UNDP, pp.227-228). The prospects for the future are not bright. In Asia and the Pacific region, for example, according to the ADB-UNDP-UNESCAP report entitled The Millennium Development Goal, Progress Report in Asia and the Pacific, Indonesia together with Pakistan and Bangladesh are projected to fail to achieve their medium development goal of halving their poverty incidence  by 2015 ( Susilo W., 2006, Harian Kompas (Kompas Daily), 6 ).

Why is it that these Muslim countries failed to live up to the Quranic expectation ? Is it because Muslim intellectuals are not aware of the backwardness of the Muslim people? Is it because that the governments of these countries since their independence at the end of the Second World War have not tried hard enough to develop their people? Is it because the ministers who manned the planning agencies or the economic ministries are not crafty enough professionally? The answers to all these questions are no. There have been brilliant analyses of the laggard conditions of  contemporary Muslim societies, of the superiority of Muslim economic prescriptions to solve economic and social problems compared to the prescriptions of conventional, neo-classical economics.

The governments of these countries have evolved a series of comprehensive five-year development plans  and have implemented them. The ministers are among the best in their generation and they have been highly  schooled in the development professions and some of them have had their higher education  in some of the elite universities in the developed countries.. Indonesia has had Prof. Widjojo Nitisastro, the icon of development planning in Indonesia and who, according to Manmohan Singh, Prime Minster of India since 2004,  is  A Legendary Personality of Asia  Anwar,  Ananta,  Kuncoro, Ed., 2007 , 1 ). Prof. B.J. Habibie, the third President of the Republic of Indonesia, who successfully led the country, in a most turbulent period, to democratic rule is also a world famous aeronautics engineer. The international community like the World Bank and the U.N has helped not only in financing but also in implementing these plans. And yet as we have seen the overall results are not satisfactory.  Then why ? It is hypotised that from an Islamic perspective these development efforts, as shown by the development plans and their implementations, based as they are largely on neo-classical economic concepts, suffer from three basic paradigmatic management operational deficiencies. First, the plans focus heavily on achieving materialistic objectives in terms of economic growth.  Such focus on materialistic objective in the form of high economic growth has resulted in increasing unemployment and poverty and other negative consequences such as corruption.

Such reliance on materialistic objective is anathema to the Islamic world view which requires that human beings be developed in a holistic manner, not only the materialistic dimension but also the spiritual dimension and the dimension of human brotherhood. Second, the organization of the plans for their implementation is based upon an individualistic paradigm, which assumes that the totality is equal to the sum of the individual parts. Each department or program is to be managed independently on its own. The summation of the success of each of the various departments or programs will equal the success of the totality. In practice such an organization becomes the breeding ground for Arrows paradoxes to flourish and stifles coordination with the result that operationally there is a very high level of  ineffectiveness and inefficiency. The two management paradigms together promote the third management paradigm, i.e., the view of man as machines to be bossed around and not as full human beings with full potential for the development of their human capital, spiritual capital, social capital and cultural capital.  Collectively the three management paradigms have resulted not only in failure to achieve sustainable long-term socio-economic development objectives but also in very high cost of financial capital and natural resources. More fundamentally, even if the materialistic objective of economic growth is achieved, it will not be in a position translate the spiritual advancement so required by the Islamic religion. The promotion of human brotherhood in the society tends to be nullified, with right and wrong, good and bad all tend to be determined by materialistic gain and loss.

It is the basic intent of this paper to show that the failures of Muslim countries to live up to the Quranic expectation is because they have organized their development efforts on the basis of the neo-classical paradigms of individualism and materialism. Consequently if the Muslim countries want to realize the Quranic expectation they have to abandon the individualistic and materialistic paradigms and adopt modes of organization and management, which are consistent with the teachings of the Islamic religion.

REVIEW OF THE LITERATURE

Neoclassical Economic Concepts

Neoclassical economics refers to the general approach of economics with a focus on certain basic concepts  about human behavior to bring about an efficient allocation of a societys resources. Efficient allocation of societys resources most importantly depends on the actions of individuals.. In this regard, neoclassical economics makes the basic assumptions that people have rational preferences that can be identified and given value; that individuals have full information about prices, their wants, products and other relevant information past,  present as well as future information to enable them to maximize utility and firms to maximize profits.

From these assumptions and the assumption of a fully competitive market, neoclassical economists build a structure to inform on how efficient allocation of resources will be materialized in the society.  Households, in the attempt to maximize utility, will purchase, given their limited income and prices of commodities, the basket of goods and services to give them maximum utility.. Firms, on the other hand, will choose a combination of inputs of labor and capital including technology to yield them maximum profits. With perfect competition obtaining in the input markets of labor and capital as well as the output market, a complete competitive market system will obtain. There will be general equilibrium and efficiency in the allocation of resources. Such a state of affairs is normally described as Pareto optimal, that is a situation where nobody can improve his/her position without at the same time hurting the welfare of at least one other person. Labor will get its fair share of the national product in accordance with labors contribution to it. Owners of capital will get also their fair share. There is no exploitation of man by man.  The government will need to intervene to overcome various sorts of frictions including market imperfections about structure and information. Such ideas about neoclassical economics may be found in any  reasonably  good textbook in economics such as that by  Case and Fair ( Case and Fair, 1992,  Principles of Economics ).

Individualism

Where does the idea of individualism fit in  the neoclassical economics as put forward above? By individualism I mean The tendency to magnify individual liberty, as against external authority, and individual activity, as against associated activity (Catholic Encyclopedia ). The neoclassical economics embodies individualism in the extreme. As already indicated the whole theoretical superstructure of the discipline rests on the basic assumption that individuals possess perfect knowledge for him or her to maximize his or her pleasure in the form of utility. Each individual has to have complete freedom to choose with regards to consumption and production. By extension each individual has to have complete freedom to form ideas and to act in other fields, in politics, in social fields and in religion.  In politics, according to John Stuart Mill, there should be minimum government intervention in the affairs of society. After elaborating various reasons why it is bad for a government agency to intervene in the affairs of the community, Mill concludes “Laisser-faire, in short, should be the general practice: every departure from it, unless required by some great good, is a certain evil (Mill, 1909, 8).

Islam does not take such an extreme view of the supremacy of the individual versus the totality of society. Each individual will finally be responsible in The Day of Judgement for all his actions in this world; but while in this world the individual is called upon to behave as part of a totality of human beings, whether that totality is the family, the enterprise or the nation. There should be a proper balance between the interest of the individual and that of the totality. Thus, the basic distinguishing feature of the Islamic system is represented in its being based on a spiritual understanding of life and a moral sense of life. A major point of this system is the taking into consideration of both the individual and society, and the securing of a balance between life of the individual and social life. The individual is not considered the central principle in legislating and governing, nor is the large social existence the only thing to which the state pays attention and for whose sake it enacts its laws ( as-Sadr, p.109 ).

What Mill has been talking about was the individualist nature of the government relation with respect to the community outside a government agency. Is this individualist orientation also applies to the community of employees within the government? To help answer this question,  one needs to look at the intellectual work of Max Weber. According to a study of Webers sociological work, Webers intellectual perspective about individualism is that it should not be confined to the narrow money-maximizing individual but it should be applied to the whole man. Weber believed ideas about economic conduct could have a power of their own, in addition to, as well as in conjunction with, the unquestioned importance of economic interest. “ ( Bendix, 1962, p. 42 ). Indeed it will be surprising if Weber does not consider individualism to be an important factor, given his belief about the ideal capitalism. According to him, ideal capitalism is  characterized by private ownership, profit, competition, laissez faire. (Eiwell, Presentation ). Such individualist character of the neoclassical economics is reflected in Webers bureaucracy. According to Weber the ideal bureuacracy is characterized by a system of hierarchy, impersonality, written rules of conduct, achievement, specialized division of labor, and efficiency.  Such individualistic tendencies among employees of an organization, tend to turn it into an oligarchy or rule by the few by officials at the top of the organization, as Weber himself admits. These individualistic tendencies will make it the more difficult to realize efficiency.

Arrows Paradox And Individualism.

In fact one has strong reason to believe that efficiency and productivity in the use of resources will be well nigh impossible especially at this time of the information revolution. This is due to the working of Arrows Impossibilty Theorem.Arrows theorem states that there is no general way to aggregate preferences without running into some kind of irrationality or unfairness.  The mathematical exposition of this theorem may be seen in the writing of  Geanakoplos.( Geanakoplos, 2001).

But simply the theorem may be put forward by saying if there are two or more people who have to make a priority ranking of three or more alternative courses of action  and if they are free to determine a priority ranking among the alternatives, then they will not succeed in producing an agreed upon ranking. A paradox will arise. For example, there are two persons, K and Y. They are to make a ranking of three alternatives A, B and C. Suppose K says A>B>C. Following the principle of transitivity in choice, A>C. Suppose further that Y says B>C>A. choice also meets all the requirements of free choice and the principle of transitivity. As one can see there is a paradox in the ranking of K and Y. The paradox of course may be resolved but the freedom of choice of K or Y or of both will be reduced. It is such paradoxes that have plagued the implementation in organizations.

But why should such paradoxes arise given Webers concept of an organization? In Webers concept, hierarchy means that Every officials responsibilities and authority are part of a hierarchy of authority. Higher offices are assigned the duty of supervision, lower offices, the right of appeal. “  Furthermore, official business is conducted in accordance with stipulated rules characterized by three interrelated rules “ (a) the duty of each official to do certain types of work is delimited in terms of impersonal criteria; ( b ) the official is given the authority necessary to carry out his assigned functions; (c) the means of compulsion at his disposal are strictly limited, and the conditions under which their employment is legitimate are clearly defined (Bendix, 1962, 424 ). Under such an organizational arrangement, it will be difficult for an official to innovate in response to changing circumstances. Each official is put in a cubicle, self-sufficient unto himself, without the motivation to confer with other people horizontally. Hierarchy results in “ Fragmented motivation, Fragmented identification, Fragmented trust, Fragmented commitment, Fragmented cooperation, Fragmented information on objective (Leibenstein, 1987,158). So structurally, coordination and innovation will be very difficult to undertake.  Hence productivity and efficiency in the total organization will be most difficult to realize.

Materialism

By materialism I mean what materialists seem to generally agree on its basic meaning.

Materialism, of the kind accepted by many philosophers and scientists, is a general view sbout what actually exists. Put bluntly the view is just this: Everything that actually exists is material, or physical ( Moser, P.K., Trout, J.,D., Editors, 1995, 1). Such meaning of materialism directly denies the existence of God and therefore in direct contradiction to the Muslim faith. Democritus, considered to be the first and the most systematic Materialist, taught that “out of nothing comes nothing. The soul is a complex of very fine, smooth, round, and fiery atoms: these are highly mobile and penetrate the whole body, to which they impart life (Catholic Encyclopedia  Materialism ). Muslims, however, cannot accept the materialistic definition of the soul. The Quran says: They ask thee concerning The Spirit (of inspiration). Say : The Spirit ( cometh ) by command of my Lord: Of knowledge it is only a little that is communicated to you, ( O men ! ) (Al Quran: 17:85).

Economists may object if one says that neoclassical economics is materialistic in its view of the world. This objection is based on the view that utility may well include such things as spiritual happiness. If some one wants to spend much of his or her time in a mosque praying or some one wants to spend a large part of his or her wealth in the cause of his or her God, this is acceptable in the thinking of neoclassical economics. This acceptability is based on the principle that people are free to choose in whatever ways they deem suitable to suit their taste. Taste is an overarching concept in neoclassical economics to accommodate whatever are the choices made by individuals. So in a philosofical sense one cannot say that neoclassical economics is materialistic in its view of the world.

It is in the pragmatic or practical sense that one may say that neoclassical economics is materialistic. In the concept of wealth, Alfred Marshall, for example, one of the foremost neoclassical economists, defines it to include material goods as well as immaterial goods. But the immaterial goods that are included as wealth are those that are capable of promoting material wealth. In the second class are those immaterial goods which belong to him, are external to him, and serve directly as the means of enabling him to acquire material goods. Thus it excludes all  his own personal qualities and faculties, even those which enable him to earn his living; because they are Internal. And it excludes his personal friendships, in so far as they have no direct business value. But it includes his business and professional connections, the organization of his buiseness, and  where such things exist the property in slaves, in labour dues, etc. “ (Marshall, 1950,.56-57). One may ask, what about skills and knowledge that a person possesess and which may further his external wealth? Marshall admits, reluctantly it seems, that knowledge and skills are wealth but “ personal wealth. Wealth simply should always mean external wealth only. But little harm, and some good seems likely to arise from the occasional use of the phrase material and personal wealth. (Marshall, p. 58).  Also in the case of collective goods, scientific knowledge is not generally to be regarded as national wealth.

German economists often lay stress on the non-material elements of national wealth, and it is right to do this in some problems relating to national wealth, but not in all. (Marshall, 59 )

So pragmatically then one may say that neoclassical economics is heavily materialistic in its view of the world. This heavily materialistic view is embodied in the very definition of economic growth. Economic growth of a country is defined to be addition to the countrys production of goods and services or national income in a particular period of time. What is national income? It is the loose name we give for for the money measure of the over-all annual flow of goods and services in an economy (Samuelson, 1958, 181). The national income reflects the ways people choose to maximize their present or future utility. Individuals may choose to spend  their money on education, health, on the services of club houses providing various types of services for the body, and for various types of goods. The political system that is consistent with free choice in the economic area is a democratic system, in which the people, through a free election choose their representatives who make choices for them in determining government spending.  These are all consistent with neoclassical thinking so that national income or product per capita reflects prosperity. The higher the economic growth, the higher is the national product per capita and therefore the more prosperous is the country. The prosperity of a country is the sum total of the prosperity of each individual; this is a reflection of individualist thinking about society where the whole equals the sum of the individual part.

World View and Model of Man

Briefly then we may describe the world view of neoclassical economics as a very individualistic and atomistic society. The working of the unfettered markets coordinate the decisions of individuals making their choices. Individuals are assumed to be rational and to possess complete information to make choices. Altruism may form part of individuals choices but these are directed to minimize costs.  Philosophically, neoclassical economics considers itself to be value free. It is a positive science and strictly differentiates between “ is “ statements and ought statements. Such philosophical orientation is reflected in the goal, research agenda, themes as well as methodological practices of neoclassical economics. ( Mair and Miller, 1991 ).

Needless to say that such worldview and model of man are anathema to Islamic perspective. The Islamic system requires a balanced treatment with regards to individual and public interest.

Verily Man Is in loss ( Al Quran 103: 2 ). Except such as have Faith, And do righteous deeds, And ( join together ) In the mutual teaching of Of Truth, and of Patience and Constancy ( Al Quran 103 :3 ).  Individuals are made up of a lowly component and a divine component and they are capable of making very bad decisions even for their own self-interest. Behold ! thy Lord said To the angels: I am about To create man , from sounding clay From mud moulded into shape; ( Al Quran : 15 28 ). When I have fashioned him ( In due proportion ) and breathed Into him of My spirit, Fall ye down in obeisance Unto him “ ( Al Quran 15: 29 ). Humans are assumed not at all all-knowing and they are mandated to seek knowledge belonging to God, to help  fulfill their vicegerent functions satisfactorily while in this world which is a temporary station to the final destination of meeting Him in the hereafter. Proclaim! And thy Lord Is Most Bountiful. He Who taught ( The use of ) the Pen. Taught man that Which he knew not. “ ( Al Quran: 96: 3- 6 ). “ For to Us will be Their Return; Then it will be for Us To call them to account. ( Al Quran 88: 25-26 ).

Total Factor Productivity : A Preliminary Theoretical Framework

By total factor productivity I mean that part of the growth in total product per capita not accounted for by the growth in total output per capita. In his detailed historical studies of the economic growth of the presently developed nations, Simon Kuznets concluded that the distinctive feature of modern economic growth of per capita product, is for the most part attributable to a high rate of growth in productivity. In one case, Kuznets calculation provides that an annual rate of combined inputs per capita of 0.55 % , compared with a growth rate of per capita product of 2.97 %. (Kuznets, 1976 , 72 ). In other words, the combined inputs of labor and capital is responsible to the extent only 18 % for the increase in per capita product. The paramount role of total factor productivity per capita in the total output growth per capita seems to be well established, although one must say there are some disagreements given the sensitivities of the results of studies to the time periods chosen, to how capital stock is calculated, and other factors. . The basic issue at the moment is what accounts for the growth of total factor productivity per capita ? One basic conclusion, one may say at this time is that it is not due primarily to the material factors of production.  Kuznets emphasizes the role of the state in facilitating the flow and application of  useful knowledge to the society., aside from its role in the provision of  socially required infrastructure and the resolution of conflicts among group interest. ( Kuznets,  346-347 ). Useful knowledge is part of intangible capital or human capital.

However  a much quoted  study, examining the factors behind the large differences in per capita output between the West ( Western  European countries and their off-shoots) and the East ( China, Pakistan, India, Bangladesh, Indonesia, Japan, Burma, the Philippines, South Korea, Taiwan and Thailand.) concludes that it is neither differences in savings rate ( which will enable countries to access physical capital )  nor differences in the stock of technical knowledge could account for the large differences in per capita output. (Presscot, 1997, 1 ). The ratio in per capita output between West and East are large, ranging from 2.1 to 7.5 in the various years between 1820 and 1992. (Presscot, 41 ). In any case one may say that the better a society utilizes its human resources, the greater will be the probability that human based capital will form the greater part of inputs to production processes and the higher will be total factor productivity.

What can one say about total factor productivity from an Islamic perspective ? Prophet Muhammad (pboh), in one of his sayings, advised Maimunah, an ex-slave, who received a goat as a gift, but then the goat died, Why dont you take the skin ? You can make use of it after you cleanse it. The people answered:  but this is carcass. Prophet Muhammad (pboh) answered What is forbidden is to eat it. (Khan,1996, 271). This is the principle of efficiency in the use of resources aptly put by Prophet Muhammad ( pboh ). One can therefore say, that from an Islamic perspective, total factor productivity is the variable to maximize, technically speaking, in a socio- economic policy. The higher the total factor productivity in an organization, achieved through Islamically consistent principles and processes, the stronger and the more sustainable will be the organization.

RESEARCH METHODS

The philosophical perspective employed in this research is the Islamic one, which regards that every phenomenon has two sides to it: the philosophical side and the positivistic side ( as-Sadr ) The philosophical side has connection with the will of God and the posivistic side has to do with the scientific side. The outcomes of events are determined by the working of cause and effect. But the will of God ultimately prevails. The primary source of change resides within man himself. This depends on his relationship with God. If this relationship is good he can bring about the necessary change in his soul to bring about the desired change in the external environment. If it is bad then he will be handicapped to bring about the change. Economic growth as the outside driver of change is contrary to the teaching of the Quran. Real change can only be brought about through changes in what is inside of the human beings. Surah 13: Al Raad ayat 11 says “…Verily never will Allah change the condition of a people until they change it themselves ( With their own souls ). Islam rejects the extreme self-love that is contained in individualism. Instead, Islam requires balance in the life of the individual and that of the  collectivity. How is this to be effected ? It is effected, among others, through consultation. Mutual consultation is a very basic approach in the Islamic religion in the management of human affairs especially to overcome differences between people. This injunction is contained in ayat 38  of Surah 42 of the Quran which itself is called Consultation.  Those who harken To their Lord, and establish Regular prayer; who ( conduct ) Their affairs by mutual Consultation.

In order to establish the basic intent of this investigation, I examine the Five-Year Plans of Indonesia  and their implementation roughly since 1950. However I concentrate in the period since 1969 until the present. For this study I concentrate on the latest Five- Year Plan of 2004-2009. I do this because I think philosophically speaking the present Five-Year Plan is one of a kind with the rest. I take Indonesia as a case study because it is the largest Muslim country in the world and because it has a public and constitutional belief in The One God.  Its population in 2005 totals 208.8 million  and 182.1 million or  87 % are Muslims (Department of Religion of the Republic of Indonesia, Website )

I did, however, survey the economic development plans of other Muslim countries, such as Saudi Arabia, Pakistan, Bangladesh, Egypt and Turkey.

We will first discuss how the individualistic approach is used in constructing the plan and in implementing it and go on to discuss the materialistic objective of economic growth and the consequent views and treatment of human beings as sources of growth. It is argued that the failure of the five-year development plan to achieve the human objectives of eradicating unemployment and other human objectives is due to these three factors.

FINDINGS

Individualistic Approach in Implementing Mechanism

The present five- year development plan 2004-2009 has the objective of achieving economic growth an average of 6.6 % per year during the plan period and at the same time reducing open unemployment from a high of 9.7 % in 2005 to 5.1 % of the labor force in 2009 (Republic of Indonesia, National Development Plan 2004 2009, 34-5 34-6.). The problem is that these targets are not likely to be achieved; in fact there is a small likelihood that they will be achieved.  One  primary reason is that the individualistic approach used in  constructing the plan and in designing the structures for its implementation nurtures the development of paradoxes as expounded by Kenneth Arrow.

There are three main agendas in the present Five Year Plan 2004-2009: agenda to promote a secure and peaceful Indonesia, agenda to promote a just and democratic Indonesia and agenda to promote the welfare of the people. Under each agenda there are groups of activities. Each group of activities is assigned to a chapter in the plan. There are 7 chapters under the first agenda, 7 chapters under the second agenda and 17 chapters under the third agenda.  (Republic of Indonesia, Five-Year Plan 2004-2009, 2005). What is striking about the agendas and the groups of activities, from the management point of view, is that these agendas and activities have no common foci. There is no focus for the three agendas. So each agenda is to be managed on its own.  Nor is there a common focus in each agenda. This means that each government department assigned to execute a particular group of activities will have to do so without reference to other group of activities in other implementing departments of the government.  For example, the Department of Industry, which is charged with implementing Chapter 18 of the plan To Increase The Competitiveness Of The Manufacturing Industry, will have to undertake its activities without a reference to activities of the Department of Agriculture, which is charged with implementing Chapter 19 of the plan Revitalization of Agriculture.  Similarly, there are no common foci to which all the activities within each group may refer. Thus, for example, in the agricultural sector, there are 17 programs; but each program will have to work on its own without reference to a common focus, common to all the 17 programs. Briefly then, there is no common area of activities  of interest for the various parties to talk about for coordination purposes in the planning or in the implementation whether at the agenda stage, at the sector stage or at the program stage. Without such points or areas of coordination, Kenneth Arrows impossibility  theorem or Arrows paradox  will take hold.

But is there any evidence that such paradoxes exist in the real world of the  bureaucracy ? One may refer to policy failures and from there infer the paradoxes that exist. A case in point is the perceived failure of the first one hundred-day program of President Yudhoyonos first one hundred days in office after winning the election for the presidency in 2004. In one poll taken by Tempo magazine,  a question was asked to 780 respondents According to you, has President Yudhoyono  fulfilled the public expectation in the one hundred days of his administration? The majority ( 73.46 % ) of the respondents or 573 people said No. Indeed it would be a big surprise if the majority gave a  positive answer because the 100-day program suffers the same deficiency as the general program of development.  In the first one hundred days of the Yodhoyono administration, it is intended to take actions that will promote the realization of three agendas: Agenda 1: To realize a secure and peaceful Indonesia; Agenda 2 : To realize a just and democratic Indonesia; Agenda 3 : To realize a prosperous Indonesia. But one may ask, what is the operational focus of the three agendas in the first one hundred days ? Such operational focus is nowhere to be seen. Because of the short time period, the focus needs to be very sharp and clear.  Without such operational focus, Arrows paradoxes will be given full reign in the processes of implementation. The respondents dissatisfaction with the performance of the President in the first one hundred days of his administration gave support to the hypnotized existence of such reign. Without operational focus means that implementation will be marked by absence of identification, trust, commitment, motivation, and information of objectives.

Another evidence of the existence Arrows paradoxes may be gleaned from the performance of the Indonesian palm oil industry. An investigative study reported in Kompas Daily in February 2006 gave the following report: What is happening to the industry at present shows that Indonesia is always one step behind and Indonesian palm oil industry is not capable of facing up to the challenges. Industry circles also complain about the unclear direction of government policy. Unless actions are taken promptly, it is feared that Indonesia will face not only losing its forests and biodiversity but also being in continued position of merely supplier of  raw materials and labor to Malaysia. ( Harian Kompas,  2006 ). The unclear government policy prevents industry from making a common agenda to guide operational policies and actions by the various stakeholders, notably business and government. The investigative study further reported about the many paradoxes besetting the industry including problems of allocation of land, of seeds quality and seeds preparation, social problems in connection with farmers, and environmental problems.

Briefly then, the ineffectiveness in implementation of development plan in Indonesia is due to, among others, the paradigmatic weakness in planning and implementation in the form of the individualistic approach in planning and design of implementing mechanism.

High Economic Growth And Failure To Achieve Employment Objective

The Indonesian present five year development plan, as did the past five year plans , gives emphasis on materialistic  development in the form of high economic growth. The present five-year plan has the objective of achieving on average 6.6 % growth per year. This emphasis on materialistic objective is highlighted in Chapter 34: Macro Framework and Financing of Development (Republic of Indonesia, 2005). In this chapter it is pointed out that all agendas of the development effort is directed towards achieving high economic growth with the hope of reducing open unemployment from a high of 9.7 % in 2005 to 5.1 % of the labor force in 2009.

Can the employment targets be achieved? Based on past experience it cannot. Since 1968, the New Order government under President Suharto has embarked upon a series of five-year plans with the express purpose of not only promoting economic growth but also eradicating unemployment.  One official report says that in the span of twenty-five years, economic growth has been on average 6.8 % per year. Exports value increased 43 times, from US $ 872 million in 1968 to US $ 37.2 billion in 1993/94. The increase in exports has been in  the non- gas non-oil sector, which increased from US$569 million in 1968 to US $ 28.2 billion in 1993/94. The non-oil non-gas exports formed 75.8 % of total exports, which should be very favorable to employment creation..Net private investment increased from US $ 65 million  in 1968 to US $ 6.7  billion in 1993/94. Foreign investment also increased significantly from only US$ 10 million in 1968 to US $ 2.0 billion in 1993/94. (Republic of Indonesia, Sixth Five-Year Development Plan , 1994/95 1998/99, Book I, 86-87.) Indonesia has been   included in the group of Asian economies dubbed by a World Bank Study as HPAEs or High Performing Asian Economies. ( The World Bank ,  1993,.65 ). And yet unemployment persistently increased. In 1980, open unemployment totaled 891 thousand people or 1.7 % of the labor force. In 1990, open unemployment increased to 2365 thousand or an increase of 10.3 %  per year. In 1995, open unemployment increased further to 6304 thousand people or an increase of 21.7 % per year. The open unemployment in 1995 has been 3.2 % of the labor force. In 2004 the open unemployment has been 10251 thousand or an increase of 17-18 % per year. ( Central Bureau of Statistics of the Republic of Indonesia: Population Census of 1980 and 1990 and Intercensal Population Survey, 1996) The unemployment in 2004  is 9.9 % of the labor force ( Department of Labor  of The Republic of Indonesia, 2004 ).  It is not only open unemployment, which has increased; but also under-employment defined to be the labor force working less than 35 hours a week has remained on a high level or has failed to decrease. From the figures produced by the statistical office, it has been known that the under-employment as a percentage of the labor force has been 36.5 % in 1980,36.9 % in 1990, 36.7 % in 2000.( Statistical Office of The Republic of Indonesia, various years. ). Both the open unemployment as well as the under-employment is recognized to be important sources of income and other kinds of poverty.

Treatment of Human Resource

Suffice it to say then that high rate of growth of the Indonesian economy has not only been not sustainable but it has failed to bring about the intended change in the economy in terms of alleviating unemployment and poverty. But why has it failed to bring about sustained change and sufficient productive employment despite the relatively high growth ? This has to do with the nature of inputs that propelled the growth. If one examines the input composition of Indonesian economic growth over the years and ask the question how much of it was due to capital growth, to labor growth and to total factor productivity, then one can get an idea of the role of human resource in the growth process. According to one study, in the period of 1972-1990, Indonesian economic growth was an average of 7.2 % per year. Out of this total growth 5.1 %  was due to capital growth, 2.1 % was due to labor growth and 0.0 % to total factor productivity. The best that the Indonesian economy has achieved in terms of total factor productivity growth was in the third plan development period (1979/80—1983/84 ) when economic growth was on average 8.0 % per year, and out of this 6.2 % was due to capital growth, 1.6 % to labor growth and 0.2 % to total factor productivity growth. (Hasibuan, 1996, 175 ). One may conclude that the growth accounting process of the various periods reveals that Indonesian economic growth was largely due to increases in inputs rather than to an increase of output per unit of input. Had there been significant increase of output per unit of input, economic growth would have been higher for the given inputs of capital and labor. Total factor productivity would have formed a higher proportion in the input composition of economic growth.

How is the treatment of human resource in the present plan ? Under the neo-classical concept of production and organization, human beings are not to be considered as active agents in the process. On the other hand they are to be considered as inputs, as passive agents to the production process whose costs need to be minimized in the effort to maximize profits and promote growth.  It is such passive concept of human resource that is embedded in the five-year plan of 2004-2009. If one asks the question, how many per cent of the average 6.6 % growth in the five years 2005-2009 is due to human resource contribution and how much to capital, one will not get an answer from the plan. Even the concept of human resource as a source of growth is not there. Such passive concept of human resource is reflected in the way the plan was created. First of all there is a separation between planning and implementation. There is a group people whose job is to construct the plan and there is another group of people whose job is to execute the plan. The group of people who construct the plan will primarily be the President with the active assistance of the planning agency.  Hence Chapter 1 up to Chapter 34 of the plan provides normative targets and activities in the various sectors of the economy during the plan period. Chapter 35 provides norms and guidance to implementers of how the plan is to be executed. The implementers will include the ministers and the personnel in the technical departments and other government bodies including regional governments. But since there is no general operational focus for all implementing units to refer to and since there are no foci of common interest for the  President and the various ministers to refer to for each implementing agency, there is no alternative but to refer to the President for all decisions high and low . Consequently the decision system has to rely on command and control.

No less damaging is the impossibility of conducting sustained dialogue with other stakeholders outside the government bureaucracy. For example, to promote industrial employment, there needs to be sustained dialogue between the ministry of industry and the various industry groups in the society. In order for these dialogues to be sustained and fruitful the ministry of industry needs to have focus, which it wants to achieve together with the other stakeholders.  Such technical arrangement for implementation and the consequent views about human resource are not conducive for the formation of social capital within an implementing organization and the relation of the organization with the outside world.

DISCUSSION/ LIMITATION

What then can one say about managing an economy of a Muslim country like Indonesia from  the Islamic perspective? A few fundamental management ideas need to be implemented.

Firstly, Indonesia should abandon economic growth as the operational ideology in managing the economy. Economic growth is needed but it needs to be put as part of a larger, more comprehensive operational vision  of development in order to realize prosperity in this world and in the next. For Indonesia  it is necessary to adopt  the creation of a moral and compempetitive society. Secondly, individualistic approaches in organizing and managing implementation need to be replaced by consultation and teamwork based approaches.

Thirdly, human participants need to be treated and developed fully as vicegerents of God on earth. The technical requirements for the success of achieving vision with the first two management principles elucidated above will include discipline and cooperation, innovation and the incessant learning for the organization as a whole and for each individual member. to improve performance. The technical operational objective is to maximize total factor productivity. The general principles of leadership exemplified by the Prophet Muhammad (pboh), such as honesty, empathy, and intelligence, and consistency will be as relevant now in this information age of the  twenty first century as it was then in the seventh century Arabia.

Basic limitations of this study need to be put forward. There is a very voluminous literature about each of the subjects discussed in the survey of the literature. I have surveyed a very limited and selective writings on each. Another basic limitation concerns TFP.  While there seems to be general agreement on its importance, there is no avenue in sight of explaining its essence and the cause and effect of it. It is the implied hypothesis of this paper that TFP cannot be satisfactorily explained using the neoclassical economic view of man and the world. But this is something for the future.

CONCLUSION

In conclusion one may say that if developing Islamic countries want to progressively realize the Quranic injunction “Ye are the best of Peoples evolved for mankind, enjoining what is right,forbidding what is wrong, and believing in Allah, they need to abandon the use of individualistic and materialistic paradigms in defining and managing their development agendas. On the basis of the experience in Indonesia, the individualistic approach in organizing activities does not allow systematic consultation and coordination among the stakeholders.Many intermediate objectives in the various sectors of the economy are difficult to realize and if they are, this realization will be at a high cost. The materialistic operational ideology of high economic growth as a promoter of social change for a better life for the population has failed in its function. . Unemployment and poverty are in no sight of being eliminated. The reliance on materialistic development means budgetary allocations for human resource development have had secondary priority, which importantly explain the low level in human development index being achieved. The individualistic and the materialistic management paradigms have precluded the development of human resources and intensive utilization resulting in the low total factor productivity as over-all inputs in the development process.

Bibliography

Ali, A. Y. , (1989) , The Holy Quran, Text, Translation and Commentary,Maryland, U.S.A., Amana Corporation.
Anwar,M.A.,  Ananta, A,  Kuncoro, A.,Ed ( 2007 ), Tributes For Widjojo Nitisastro By
Friends From 27 Foreign Countries, Jakarta, Kompas Book Publishing
as-Sadr, A.M. B., Our Philosophy, Great Britain, Muhammadi Trust of Great Britain and Northern Ireland , www.goecities.com/Athens/Cyprus/8613/writing .html , retrieved December 22, 2007
Bendix, R.,( 1962 ) Max Weber — An Intellectual Potrait,  New York, Doubleday & Company, Inc.
Case,K.E., Fair, R.,C. (1992 ) Principles of Economics, 1992, New York, Prentice Hall
Catholic Encyclopedia on CD-Rom, http://www.newadvent.org/cathen/0776/a.htm, retrieved January 20, 2007
.Central Bureau of Statistics of the Republic of Indonesia: Population Census of 1980
and 1990 and Intercensal Population Survey, 1996, Jakarta various dates.
Eiwell, Dr.,F., Max Weber, Presentation, 2006(?), http://www.faculty.rsu.edu/-felwell/Theorists/Weber/Presentation/2., retrieved January 22, 2007
Department of Religion of the Republic of Indonesia,
http: // www.depag.go.id/index.pah?menu- = page 8 page id=17 ), retrieved December 11,
2006.
Geanakoplos,J ( 2001 ),. Three Brief Proofs of Arrow’s Impossibility Theorem, Yale University Press, New Haven, USA
Harian Kompas( Kompas Daily), 25 February 2006, Jakarta
Hasibuan, S., 2004,   Meraih Keunggulan Indonesia, Strategi Alternatif Pembangunan Bangsa, Jakarta, Fakultas Ekonomi Universitas Al Azhar Indonesia, Jakarta 2004 ( To Achieve Indonesian   Excellence—Alternative Strategy In National Development, Department of Economics,  Al Azhar University Indonesia.
Khan, M. A., Ajaran Nabi Muhammad saw tentang Ekonomi, ( The Teachings of Prophet
Muhammad ( pboh ) About The Economy, Bank Muamalat, Trans., 1996, Jakarta, Bank
Muamalat.
Kuznets, S., Economic Growth of Nations, 1976 , Cambridge, Massachusetts, Harvard University Press.
Leibenstein, H.(1987 ), Inside The Firm, 1987, Harvard University Press, Cambridge, Massachusetts
Mair.D., Miller, A., G. Edit.( 1991),  A Modern Guide To Economic Thought, England, Edward Elger Publishing Limited.
Marshall, A.( 1950), Principles of Economics,  The Macmillan Company, New York.
Mill,J.,S., ( Ashly, W.J., Edit.) ( 1909 ) The Principles of Political Economy,  Book 5,
Chapter 11,   London,Longmans, Green and Co.
ttp://socserv2.soscimcmaster.ca/econ/ugcm/3ll3/mill/prin/book5/bk5ch11, retrieved
December 20, 2006
Moser,P.,K. and Trout, J. D. ( Editors ) ( 1995 ), Contemporary Materialism, A Reader, 1
London and New York, Rouledge
Presscott,E.C (1997 )., Needed: A Ttheory of Total Factor Productivity,  Federal
Reserve  Bank of Minneapolis and University of Minnesota, Minnesota, U.S.A..

Republik Indonesia, Peraturan Presiden Republik Indonesia No. 7 Tahun 2005 Tentang
Rencana Pembangunan Jangka Menengah Nasional Tahun 2004-2009  ( Republic of
Indonesia,  Decree of the President of the Republic of Indonesia No.7 2005
Concerning Medium Term National Development Plan for the Year 2004–2009, Jakarta
Republic of Indonesia ( 1994 ) Sixth Five-Year Development Plan , 1994/95 1998/99, Jakarta
Samuelson, P.A., Economics ( 1958 ), New York, McGraw-Hill Book Company.
Susilo, W., Kemiskinan di Indonesia( Poverty In Indonesia), Harian Kompas( Kompas
Daily ), 9 November 2006
Tempo Magazine, January31-February 6, 2005 Edition
The World Bank ( 1993 ), East Asian Miracle, New York, Oxford University Press
UNDP (2005), Human Development Report 2005,  New York , Oxford University Press
AUTHORS BOOKS
Hasibuan, S. ( 2004 ), Meraih Keunggulan Indonesia—Strategi Alternatif Pembangunan Bangsa
( To Achieve Indonesian Excellence ),  Jakarta, Department of Economics,
Universitas Al Azhar Indonesia 380 pages.
Hasibuan, S. ( 2001 ), Manajemen SDM: Suatu Pendekatan Non-Sekuler ( Human Resource
Management : A Non- Secular Approach), Solo,  Muhammadiyah
University Press , 181 pages
Hasibuan,S. ( 1996 ), Ekonomi Sunber Daya ManusiaTeori Dan Kebijakan ( The Economics of
Human ResourcesTheory and Policy ), Jakarta, LP3ES, 213 pages

Title of Paper: The Law of Consistency And Socio-Economic Development
Author:  Sayuti Hasibuan, PhD, Professor and Past Chairman, Graduate Program in Management Sciences, Dept. of Economics, Muhammadiyah University Surakarta, Solo, Indonesia and Dean, Department of Economics, Al Azhar University Indonesia, Jakarta, Indonesia.

Abstract

The paper intends to give support to the statement that there is no world-view other than the unity of the divine law of Tawhid in the Quran which can properly explain in a cognizant and formal manner the differential socio-economic development experience in the world today. To this end the world empirical phenomena will be divided in two groups: the physical phenomena which are the subject of the physical sciences and the human phenomena which are the subject of the social sciences. It may appear at first sight that these phenomena are guided by different natural laws. On deeper investigation and at the most fundamental level, however, it is seen that they are guided by the same divine law, the law of consistency. While the discussion will include ideas about the physical phenomena, the emphasis of the paper will be on the human phenomena, specifically on the economy, finance and development. Based upon the general applicability of the law of consistency in human societies in the contemporary world and in historical time, it is strongly recommended that Muslim countries review their development strategies to make them more in line with the basic values of syariah economics.

The Law of Consistency and Socio-Economic Development

1. Introduction

Muslims generally recognize the fact that their societies are trailing the western countries in socio-economic development. Why this is so is not very clear. Is there a basic natural law that has been broken by these Muslim countries so that they are lagging behind ?
My answer to this question is that these lagging Muslim countries have not lagged behind because of lack of natural resources. Nor have they lagged because of the lack of capable people to manage their development. Instead they have lagged because they have chosen to neglect a very basic natural law in managing their socio-economic development, the law of consistency. This means that the technologies that have been applied to develop their economies have not been consistent with their basic beliefs as Muslims. There has been an incongruence between basic beliefs and intents on the one hand with operational paradigm actually used to manage the development efforts on the other. The operational policies actually employed by and large are those based on neoclassical economics. The cardinal values of neoclassical economics are individualism and materialism which are contrary to the values in the Islamic religion. This incongruence leads to inefficiency and ineffectiveness in the allocation and use of scarce resources.  Therefore they are lagging.

2. Methodology and data

In this paper, I will first make a review about the law of consistency and ask the question whether the consistency one sees in physical phenomena is also to be found in social phenomena. The upshot of this review will be to suggest that there is in fact such consistency. Next, I will review the differential socio-economic experiences in the world to-day especially between the developed western countries and the Muslim developing economies. I will suggest that the Muslim countries have been lagging because there has been incongruence between the technologies they have chosen with their basic beliefs as Muslims. This is followed by a more detailed study of Indonesia, as the largest Muslim country in the world, with 87 % of its presently approximately 228 million total population being Muslims.  The developed western countries on the other hand have had no such incongruence. They therefore have succeeded.

The data that I use about the state of development of the Muslim countries and the developed economies are those from the Human Development Report of the UNDP 2007/2008. The data do not report about spiritual development. But to the extent that the data are accurate, to my mind, one may use them for comparative purposes  in human development in a given period of time. The paper is written on the assumption that the main issue facing humanity to-day, especially with regard to Muslim countries is to overcome the basic problems of poverty and injustice.

3. The Law of Consistency

According to one exposition Matter and energy obey a limited number of rules that describe their behavior; these were termed natural law in a significant US court decision that helped define science from a legal perspective. A scientific explanation better be consistent with natural law, or it wont get very far within the scientific community ( assuming the community is paying attention ) ( Timmer, 2006.) The law of gravity discovered by Newton in 1687 is an example of a rule that governs the behavior of falling matter. Newton held that every particle of matter in the universe attracts every other particle with a force that is proportional to the product of their masses and inversely proportional to the square of the distance between them. Mathematically this is expressed by the formula  F= (Gm1m2): (d squared ) where F=force of attraction, G=universal gravitational constant whose value depends on the units chosen to express it and  m1,m2 are the masses.  (The New Encyclopaedia Britannica, Volume 5,1991, pp. 435-6).

A very important quality of the rule of the behavior of matter as embedded in the law described by Newton is its consistency. Everywhere on earth, whether in America, Europe, Asia or Africa,  the force of attraction of the earths gravity on an object will be equally strong as long as the distance of the same object from the surface of the earth remains the same. So, if one drops a textbook of 400 pages from a table in a classroom in Berkeley, California, for example, it will fall to the floor in the same time period if one were to drop the same textbook from a table of the same height in Jakarta.  Another important characteristic of the rule of behavior is its generality in that it applies to all kinds of objects irrespective of their color, shape or function. What is important is its mass and distance from the surface of the earth. As long as these are the same, the force of attraction will be the same, whatever the object. With the development of the science of relativity, one needs to qualify the classical conclusion that the statement  is true within a range of speed in which the objects are involved. But for the very practical purpose I have in mind, that is consistency in physical behavior, the classical law of mechanics as enunciated by Newton seems to be sufficient. Notice that at low speeds and weak gravitational fields, general and special relativity reduce to Newtonian physics, i.e. everyday experience. ( Schneider & Amy, 2008 )

Another example of consistency in behavior of physical phenomena is exemplified by the law governing the behavior of energy or thermodynamics. The science of thermodynamics is based on two fundamental laws.  The first law of thermodynamics says that energy can be neither created nor destroyed. Thus, during a chemical or physical process, the total energy of a system and its surroundings remains constant. In any process, a system may gain or lose energy, but any change in the energy of a system is accompanied by a corresponding energy in the surroundings. When you sit in a cold room, for example, your body loses heat energy, but this heat loss results in an equal heat gain by your surroundings. The second law says that there is a general tendency toward disorder or randomness in the universe. This disorder is known as entropy. All processes proceed in such a way that the amount of entropy in the universe increases. ( Johnson,1983, pp. 111-112).

Although the amount of entropy increases, the amount of energy remains the same. For example, if there are two cylinders separated by a valve; one cylinder is empty but the other one is full of gas. If the valve is opened, the gas moves from the full cylinder to the empty cylinder. There is an increase in entropy. But the amount of gas energy in the two cylinders remains the same. Hence there is a very high level of consistency shown by the laws of thermodynamics.

But what has the laws of thermodynamics to do with living things ? living things must obtain energy to counter the general tendency toward increasing entropy in the universe. Maintaining life is like walking in a fast- flowing river. It takes work just to stand still facing upstream in the current and even more work to move upstream. Life is possible in a universe in which entropy is increasing, but it takes a lot of energy to do the work necessary to live. ( Ibid., p.113 ).

But where does the energy come from? The living organism has to import it.Thus, living systems, maintaining themselves in a steady state, can avoid the increase of entropy, and may even develop towards states of increased order and organization. ( Bertalanffy, 1968, p. 41 ).

What can one learn about change and its management from the physical laws of nature as exemplified by the workings of the classical law of falling matter and the laws of thermodynamics ? One is informed that these laws are the will of The Creator and they are imbedded in nature. The imbedded will affect the outside world. Change in the outside world is thus brought about by the imbedded inner will of The Creator in the physical entities. Change does not come from the outside to the inside but from the inside to the outside.

4. Social Behavior and The Second Law of Thermodynamics.

From the example of the operation of the Second Law of Thermodynamics in individual human living thing, it stands to reason to ask whether The Second Law also applies to the behavior of a group of human beings such as a nation or a country. Intuitively The Second Law does apply. After all the population of the world is still increasing, as is the population in each country in the developing world.  Furthermore the aspirations of the people of the world for a better life are also still increasing. This is especially true for developing economies following their independence from colonial rule. The increasing population and the desire for a better life are in a very important sense sources of increased disorder or entropy in these human societies. At the same time there is a need for a new equilibrium. There is a need for more food to feed the increasing population. There is a need for more infrastructures of all sorts to supply services in transportation, in health and education, in housing, and all other necessities of life.  In terms of The Second Law of Thermodynamics one may say there is a need to control the great entropy of underdevelopment to uplift a less developed economy to a state of less entropy of a developed economy, to create a new equilibrium. The less developed country being an open system has to have energy injected into it to bring about increased and more desirable order. The energy injected will be in the form of human will properly translated into strategies and actions.

5. The Basic Law of Social Behavior: Consistency With National Objectives.

The basic question here is what kind of efforts needs to be undertaken to exercise control over the great entropy embodied in underdevelopment? How can The Second Law help us answer this question?

It needs to be noted that, whereas in the case of individual human living thing, the rules of behavior governing the various chemical and other processes within the human body have been programmed in some fashion, to achieve a certain objective, which one may say to be  the organic growth of a healthy human life. For example, eating too much fatty food will increase the physical size of the body too much and too fast. Such growth will interfere with the proper functioning of the human heart. What kind of food and how much food to eat have to be in accord with the rules governing basic chemical and other nutritional processes within the human body so that healthy living may be created. Humans will need to find these rules and that is the reason why the medical profession becomes very important. This profession will tell us the processes within the human body and the implication of such knowledge for our eating behavior consistent with the requirements of these processes so that one can lead a healthier life at least biologically.

In the case of the behavior of a group of human beings such as a country, there are no pre-programmed rules of how to control the great entropy associated with underdevelopment to create a more developed society of less entropy. Humans need to invent those rules so that they can achieve their social or group aims. What should those rules be? The law of gravity discovered by Newton and The Second Law of Thermodynamics, however, put a very basic restriction that whatever efforts are undertaken to reign on the great entropy associated with underdevelopment, these efforts must be consistent with the aims to be achieved with these efforts. The rules of behavior must be consistent with the objectives to be achieved. The objectives and their attendant ideas will furnish the basic beliefs of the country. The rules of behavior, in the form policies and strategies, will be the technologies. The basic beliefs and the technologies have to be congruent with each other.  One therefore may enunciate a basic social law of behavior. The law says that the social behavior of a group of people such as a nation must be consistent with the nations objectives; otherwise the objectives will not be realized.

I call it a law because it may be considered to be the counterpart of physical laws of behavior, specifically The Second Law of Thermodynamics. Furthermore, such congruence has been found to be true with regard to the achievement of different civilizations in history. The ancient Egyptians or the pharaohs had the basic belief that life after death is more important than life on earth. They therefore struggled to make preparations for life after death. For a lifetime pharaohs would carefully hoard possessions to carry with them on their journey into eternal life as the pharaoh would make the same journey into eternal life. Their ideology of being interested in the distant future and being uninterested in the individual was as important to their long-term success as the mud of the river Nile. ( Thurow, 1996, p.13 ). The Romans, according to an ancient  military observer, Vegetius  The Romans were less prolific than the Gauls, shorter than the Germans, weaker than the Spanish, not as rich or astute as the Africans, inferior to the Greeks in technology and in reason applied to human affairs. What they had was the ability to get organized and a vocation for domination (Thurow, 1996, p. 15 ) China invented all of the technologies necessary to have the industrial revolution hundreds of years before it occurred in Europe. But China did not have the right ideologies. ( Thurow, 1996, p.15 ). So the revolution did not occur.

These experiences from history suggest that a country or a people not only need to have an ideology but that ideology needs to be correctly translated to effect external events. Alternatively, external events need to be understood in terms of the ideology of the people or absence thereof.

There is in fact nothing new about the relation between inner beliefs and external events. The Quran has said so more than 1400 years ago. Verily never will Allah change the condition Of a people until they Change what is in themselves. (The Holy Quran, Surah 13:11). The need for inner beliefs and external events to be consistent may be considered to be an important instance that there is no world-view other than the unity of the divine law of Tawhid in the Quran which can properly explain in the differential socio-economic development experience in the world today.

6. Differential Human Development Achievements Between Islamic Countries  and Western Countries.

There has been widespread recognition among Muslims that they have not achieved as well as they should in socio-economic development compared to the more developed western countries and compared to the Quranic injunction that they are the best of peoples evolved for mankind, enjoining what is right and forbidding what is wrong and believing in Allah.  This recognition is reflected, for example, in the answer of Dr. Iman Youssef Chebli, PhD, Chairman of World Islamic Mission Association to a question asked by a reporter from an Indonesian daily newspaper Republika. At the end of the  conference, held in Libya 27-30 October 2008, the Chairman was asked by the reporter as follows  The retrogress experienced by the Muslim umah in the last few centuries, is this due to the failure of dakwah ?  The answer given by the Chairman was Yes, I think so. One of the factors that have made the Muslim umah weak is the problem of education. There has been a kind of weakness in the area of education. Another question asked to the Chairman in the interview was What is the biggest challenge faced by the Islamic community in this era of globalization? The answer was The biggest challenge is how make the Islamic community return to the real teachings of the Islamic religion. (Tabloid Republika, 2008, p. 5 ).

What the Chairman has said is fully corroborated by the facts. I will quote from an earlier study that I have made about the subject, with the data updated, as follows: “No Muslim country in the world, large or small,  has ever achieved anything near what is achieved by the industrialized non-Muslim countries in terms of human development index or technology achievement. An important indication of this achievement, although far from perfect, is the human development index developed by the United Nation Development Program (UNDP). The highest human development index achieved by an Islamic country, according to the Human Development Report 2007/2008, was 30 by Brunei Darussalam out of 177 countries in the world. Larger Muslim countries like Malaysia, Saudi Arabia, Turkey, Indonesia, Pakistan and Bangladesh are left far behind The last three are respectively number 107, 136 and 140. Position number one in human development index was achieved by Iceland ( UNDP , p.254 ). The relatively low position in human development index reflects lower achievement in health and education. In Pakistan, for example, life expectancy at birth was 64.6 years versus 81.5 in Iceland, combined gross enrolment ratio was 40.0 % versus 95.4 % in Iceland and GDP per capita of US $ 2370  versus US $ 36 510 in Iceland ( UNDP, p.254 ).  A large number of Muslims are mired in grinding poverty with income below US$ 1 per day. Using US$ 1 per day per capita as the poverty line, in the period 1990-2005, 7.5 % of the population in Indonesia, 3.1 % in Egypt, 17.0 % in Pakistan and 41.3 % in Bangladesh were below the poverty line. When the poverty line is increased to US$ 2, the proportion of the population below the poverty line increases substantially, with Malaysia 9.3 %, Turkey 18.7 %, Indonesia 52.4 %, Pakistan 73.6 % and Bangladesh 84.0 % (UNDP., p.254). The prospects for the future are not bright. In Asia and the Pacific region, for example, according to the ADB-UNDP-UNESCAP report entitled The Millennium Development Goal, Progress Report in Asia and the Pacific, Indonesia together with Pakistan and Bangladesh are projected to fail to achieve their medium development goals of halving their poverty incidence  by 2015.( Hasibuan 1, 2006 )

7. The Case of Islamic Developing Economies: Case Study Indonesia

To find out why Muslim countries have not fared as well as they should, I studied in more detail the case of Indonesia and for this I have documented some basic long term facts about Indonesian development. A government report says that In 25 years economic growth of Indonesia has been on average 6.8 %.(Republic of Indonesia,1994 ). The same report says that the value of total exports increased 43 times from US$ 872 million in 1968 to about US$ 37.2 billion in 1993/94.  Foreign loans increased from US$ 266 million in 1968 to about US$ 5,9 billion in 1993/94, and foreign investment (net) increased from US 10 million in 1968 to about US $ 2 billion in 1993/94. Indonesia has been categorized as a miracle economy. (The World bank, 1993 ). Yet other government sources especially the central bureau of statistics have documented various negative aspects of the development process. Open unemployment has increased from 1.7 % of the labor force in 1980 to about 8.5 % at present. Underemployment remains at a high level at 36.5 % in 1980, 36.6 % in 1990, and 36.9 % in 1995, 36.7 % in 2000 and 32,2 % in 2004. There has been a very wide gap in the production capacity of small and medium enterprises on the one hand and large enterprises on the other.  In 2003, for example, official government sources indicate that 42.4 million units or 99.9 % of all  enterprises produced 56,7 % the GDP at that time providing 79.0 million of employment while 0.1 % of enterprises produced 43.3 % of the GDP and 0.5 % of total employment. As may expected, investment has been disproportionately allocated to the labor absorbing sectors of the economy. In The Vth Five Year Development Plan, 1989/90-1993/94, for example, agriculture received an allocation of only 2.98 % of the total investment of Rp. 334.4 trillion while it employs 48.15 % of the labor force totaling 82 million. Such a misallocation of investment resources is at the base of the consistently low total factor productivity of the economy and its low competitive capability in the various areas of socio-economic activities. More tellingly is the phenomenal rise in various kinds of criminal activities including corruption. In the years before the change of regime in 1998, and with a base 1985=100, the number inmates in jails committing various crimes increased to 110.5 in 1993, 110.5 in 1994, 116.0 in 1995, 112.3 in 1996 and 108.8 in 1997. With regard to giving kickbacks ( penyuapan ), which is a form of corruption, the index numbers were 76.5 in 1993, 100.0 in 1994, 129.4 in 1995, 535.3 in 1996 and 352.9 in 1997. ( Hasibuan 2,  2008, pp.4-13 ).

Why is it that Indonesia failed to live up to the Quranic expectation ? One may say that Indonesia has failed because she has adopted the wrong strategy of development that is she has followed the precepts of neoclassical economics. These precepts are contrary to the basic values of the Islamic religion. First, these strategies focus heavily on achieving materialistic objectives in terms of economic growth. Such focus on materialistic objective in the form of high economic growth has resulted in increasing unemployment and poverty and other negative consequences such as corruption.

Such reliance on materialistic objective is anathema to the Islamic world view which requires that human beings be developed in a holistic manner, not only the materialistic dimension but also the spiritual dimension and the dimension of human brotherhood. Second, the strategies adopted for the implementation of the development plans is based upon an individualistic paradigm, which assumes that the totality is equal to the sum of the individual parts. Each department or program is to be managed independently on its own. The summation of the success of each of the various departments or programs is assumed to be equal the success of the totality. In practice such an organization becomes the breeding ground for Arrows paradoxes to flourish and stifles coordination with the result that operationally there is a very high level of ineffectiveness and inefficiency. The two management paradigms together promote the third management paradigm, i.e., the view of man as machines to be bossed around and not as full human beings with full potential for the development of their human capital, spiritual capital, social capital and cultural capital. Such a view of man is contradictory to the Islamic view of man as a slave and servant of Allah and as His vicegerent on earth. Collectively the three management paradigms have resulted not only in failure to achieve sustainable long-term socio-economic development objectives but also in very high cost of financial capital and natural resources. More fundamentally, even if the materialistic objective of economic growth is achieved, it will not be in a position translate the spiritual advancement so required by the Islamic religion. The promotion of  human brotherhood in the society tends to be nullified, with right and wrong, good and bad all tend to be determined by materialistic gain and loss. (This part is a paraphrase of a part of the study previously quoted).
So an examination of the long term experience in socioeconomic development effort in Indonesia has revealed that Indonesia in fact has adopted an inappropriate strategy. It is inappropriate because there is incongruence between the belief system of the population and the technology actually adopted in socioeconomic development. The belief system is based on Islamic values. The social technology adopted in development is based on secular neoclassical system of thought. Societies flourish when beliefs and technologies are congruent; decline when the inevitable changes in beliefs and technologies become incongruent. This reality can be seen by looking at successful societies in the pastmany of them built on very different values and operating very different technologies from those that exist today. But they all needed this congruence if they were to succeed. ( Thurow, 1996, p. 12 ).
More recently I have examined Law No 25, 2004 about the system of development planning in Indonesia and Law No.17, 2007 about the long term development plan, 2005-2025 of the country.  Both of these laws faithfully reflect the neoclassical economic principles of materialism and individualism. The more detailed examination of the laws has been reported in a bulletin of the Department of Economics, Al Azhar University Indonesia. ( Hasibuan 3, 2008 ). Both of these laws underscore the incongruence between belief system and technologies adopted in Indonesian development. The consequent basic failure is no surprise. The medium term development plan of 2004-2009, has so far been wanting in the achievement of its targets of either the average growth of 6.6 % per year or of reducing the open unemployment rate from 9.9 % in 2005 to 5.1 % in 2009. The unemployment rate in 2008 is 8,5 % ( Feb. ) while the growth rates are 6.2 % in 2008 and a projected 3.5 % in 2009. (The Economist, November 22-28, 2008, p. 101).

More importantly Indonesia, as a nation has not been consistent with the basic intent of the ideals which has been enshrined in the preamble of the 1945 constitution. Consequently, the country has failed to achieve what the constitution says the country should achieve and that is to realize Belief in The One God, a just and humane humanity, the unity of the country, the practice of consultation or  musyawarah and social justice for all Indonesians.  Consequently if Indonesia wants to realize her ideals as embodied in its constitution it has to abandon the individualistic and materialistic paradigms and adopt modes of organization and management, which are consistent with the teachings of the Islamic religion.

8. Four Fundamental Ideas of Adam Smith

The Muslim countries as represented by Indonesia, have lagged behind in terms of socioeconomic development because their development policies have not been consistent with the development paradigm as required by their basic intents. By the same reasoning one may ask have the western countries followed through their basic intents in their development efforts consistently. The answer is yes because the western developed economies have adopted development and other policies which are fundamentally consistent with their basic intents as represented by four fundamental ideas of Adam Smith. These ideas are followed through in neoclassical economics as a pool of knowledge to guide policies and actions in western developed economies.

Professor Edwin R.A. Seligman of Columbia University ascribed two fundamental ideas contained in Adam Smiths book The Wealth of Nations.  The two fundamental ideas of The Wealth of Nations are self-interest and natural liberty. Quoting from the book, Prof. Seligman says: Self-interest:
It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their own advantage.  ( Smith,  1960, p. vii ). Natural liberty:  All systems, either of preference or restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as soon as he does not violate the laws of justice, is left perfectly free to pursue his own interests in his own way, and to bring both his industry and his capital with those of any other man or order of men.  ( Smith, p.ix ). On the subject of freedom, Prof. Seligman concludes Laissez faire, laissez passer  is the key which unlocks all economic puzzles. The be quiet system, as Bentham calls it, is the sole panacea of human ills, the only hope of social regeneration. Give free play to the natural laws of liberty and equality, and prosperity will shine in all its refulgence on the expanse of national life.

But upon reading the book I came across a passage which I think is of great significance. The self interest to be pursued in a climate of freedom of enterprise consists mainly materialistic in nature. In practical life at this time as in the time of Adam Smith, this materialistic aspect is represented by money. To grow rich is to get money; and wealth and money, in short, are , in common language , considered in every respect synonymous. ( Smith, p. 376 ). Such concern with materialistic aspect alone is further emphasized in the fact that, as Seligman put it,  But what he was concerned with in The Wealth of Nations was an analysis of the economic situation and a consideration of the motives and conditions that make for wealth, rather than for the wider conception of welfare in general.( Smith, pp.vii-viii ). I would concur with this judgment of Prof. Seligman that Adam Smith separated economics as a field of inquiry from those of other fields affecting welfare such as morality. Adam Smith has written another book Theory of Moral Sentiments in which he posits the doctrine of sympathy as the real bond between human beings. But this doctrine of sympathy is not weaved into the economics of The Wealth of Nations. This separation is an important aspect of methodology not only in the development of economics as a science but also in policy making and implementation. The methodology I mean is the positive methodology which was later to be further elaborated by Comte through his six volume books Cours de philosophie positive, published  between 1830 to 1842 ( Encyclopaedia Britannica, 1991, Volume 27, p. 369)

These then are the four cardinal ideas affecting the development of economics and economies since the The Wealth of Nations was written in 1776: individualism, materialism, freedom, and positivism. These are the basic underlying socioeconomic policies in the western countries, and in fact in much of the world. Capitalism as a system is based on these. Consistent with what is written in The Wealth of Nations, by individualism in this further development means operationally, the tendency to emphasize individual interest and activities as opposed to group interest and activities. (Catholic Encyclopaedia ). By materialism here is meant what all materialists mean by it that all things are physical in nature. ( Moser, 1991). By freedom here is meant that a person is free to do what he deems necessary to promote his interest in the economic, social, political and cultural fields as long as those actions are in accord with existing laws of the land. It is also the freedom as conceived by Thomas Paine And God said, Let us make man in our own image. In the image of God created be him; male and female created he them. (Paine, 1921, p. 43 )

But in what sense are the western developed economies consistent in their behavior with the four basic values? The consistency is to be found in at least three fundamental areas: socio-economic policies, the activities of the intellectuals and education. Despite the variation in the practice of capitalism in the different developed economies, these policies have been based on the same fundamental principles. The main objective to be pursued with socioeconomic policies is above all to maximize the growth in material wealth as measured by Gross Domestic Product. To promote such growth, the population is encouraged to practice the habit of high consumption. Freedom of consumption is the hallmark of western societies. To promote growth, a banking system based on interest, fiat money and minimum reserve ratio is established.  To promote growth, laws and other social policies are created so that firms are encouraged to invest and maximize returns on their capital investment. The rule of law and social stability is to be established so that investment and consumption activities may proceed unhindered. Military power is promoted not only for the purpose of safeguarding internal peace but also as a means for foreign conquest in one form or another. History testifies to the statement that the power to dominate other countries and societies is a very important component of foreign policy of western developed economies since Adam Smith wrote his book The Wealth of Nations. In modern times, this domination is effected through an international monetary system using the dollar as its base.  The domination and influence of other countries and societies will help create the necessary conditions for continued GDP growth and high consumption domestically. All the laws and policies are to be made with secular principles, with agreements solely among human beings and with the object of improving life on this earth alone.

9. Economics Since Adam Smith: No Change in Fundamental Ideas.

Since Adam Smith wrote his book The Wealth of Nations, there have been continuous activities of intellectuals to improve upon the basic principles, theoretically as well as in the practice of policies. There have also been a lot of attacks on neoclassical economics. Economics has become more specialized and mathematical in its exposition and is separated from political economy as originally written by Adam Smith. Having said all these, however, I would subscribe to the idea that economists generally consider economics to be alive and well. The first thing to be said about this development is that one should avoid gaining the impression from it that science is recognizably in a critical state. In fact, in the eyes of the vast majority of its practitioners, looked upon as a scientific discipline pure and simple it seems to be in a generally healthy condition. (Roll, 1978, p. 604 ). Such conclusion is surely supported by the long line of comments and even criticisms bearing on the ideas of Adam Smith.

In the classical economics of Adam Smith it is thought that there is an autonomy and self-regulation, in the processes of wealth, in the operation of prices, rents, interest, and wages. General equilibrium occurs automatically. If there is unemployment or over-production, it is an abnormal and temporary situation. The normal situation is general equilibrium. ( Djojohadikoesoemo, 1991, pp.26-52 )

This view of automatic equilibrium is further elaborated by the neoclassical economists of the first generation. The classical economists emphasize supply as the determinant of price and employment. The neoclassical economists of the first generation, Alfred Marshall among others, emphasize the problems of demand and that price is a combination of supply and demand factors. Demand depends on the utility of the products as perceived by the consumers. Utility is dependent upon psychological evaluation of consumers. Exchange also involves transaction of labor, materials and capital. With all these however condition of automatic equilibrium will prevail.

In later years there has been a correction on the nature of competition.
Competition may be constructive or destructive: even when constructive it is less beneficent than co-operation. ( Marshall, 1950, pp. 1-13)  Competition is not only of the perfect type. It is also imperfect and monopolistic. Edward Chamberlain and Joan Robinson among others are the writers who wrote on imperfect and monopolistic competition. ( Wrenn,et.al., 2008 ).  Perfect competition of the classics and imperfect competition of the neoclassics appear to exist simultaneously in the economy. Pure competition is the basis for general equilibrium in the economy. In reality both types of competition exist. There are various types of markets. For the same product there is competition based upon differentiation. ( Djojohadikoesoemo, pp. 100-108 ). The works of these authors are important because they bring us nearer to reality. But the basic ideas of materialism and individualism are not changed by the writings in imperfect competition. The idea of monopoly further emphasizes the animal spirit of entrepreneurs seeking greater profits at the expense of the public.

The micro thinking of neoclassics does not help in providing solutions to the problems of unemployment in the 1930s.
Essentially what Keynes said is that there is no automatic process that supply creates its own demand. This absence of automatic adjustment occurs in the labor as well as in the capital markets. In the labor market a rise or fall in the real wage due to a rise or fall in the product price  will result in decline or rise in employment. This is what the classics say. Keynes says, that when aggregate demand increases and prices increase relative to money wages, and with employment increasing, it is difficult for workers to demand corresponding increase in real wage. Furthermore, in wage negotiations, it is normal for labor to fight for money wage and not real wage. Marginal cost of labor is determined by money wage and not real wage.  So there is a breakdown in the classical thesis that the supply of labor is a function of real wage as its main determinant.  In reality there is a lot of underemployment of resources in the society so that there are various types of equilibrium. But the most important equilibrium is that of full-employment equilibrium.

In the capital markets too, there is no automatic adjustment to bring about  full-employment investment. Investment depends on the operation of three variables all of which will determine aggregate demand: the propensity to consume, the rate of interest, and the marginal efficiency of capital. According to Keynes, the rate of interest is the amount that needs to be paid to money holders to release ( i.e. to overcome their liquidity preference) their funds for investment. But such released funds need not automatically lead to real investment. Interest is not the price that automatically brings together an equilibrium between the supply of savings and demand for it in investment. Real investment depends on the marginal efficiency of capital. The expected return from investment may be such that although the rate of interest has been low, real investment does not occur.  If investment does not occur and there is a lot of loanable funds in the society resulting from high savings, then effective demand will not increase. Instead it may decrease. There will be unemployment. When unemployment increases, the government will need to intervene directly. The government will also need to intervene to regulate the interest rate and the money supply. The interest rate will affect the marginal efficiency of capital and therefore investment. Keynes is quoted to have said I agree that our methods of control are unlikely to be sufficiently delicate or sufficiently powerful to maintain continuous full employment…I should probably relax my expansionist measures a little before technical full employment had actually been achieved. ( Skidelsky, 1992, p. 603 ).

There are other situations when the government needs to intervene in the economy. For example, when there is over-investment in the economy, as is happening at the moment in the housing sector in the American economy, leading to bank failures and credit crunch and recession, the government needs to find ways to promote the flow of credits again to revive the economy.
The call for government intervention in the economy in order to keep employment at high level is a big blow to the idea of laissez faire. Prosperity will shine not because   natural laws of liberty and equality  are given free play, but because they are not given free play. However, it must be noted that free is certainly relative. The present market system in all the capitalist world is certainly free compared to communist system of Stalin or Mao Tse Tung.

Briefly then, over the last 230 years or so since Adam Smith wrote his book, there have been very alive intellectual activities on the part of scholars to provide corrections or qualifications to some of  the basic ideas of neoclassical economics. These activities play very important role to keep the capitalist system dynamically functional in accord with the fundamental ideas. The perpetuation of these ideas is furthermore enhanced through their teachings in economic curriculums in universities. The text books used, such as the Macroeconomics  of Dornbusch and Fischer ( Dornbusch and Fischer, 1990 ) are the active promoters of these ideas.  There are other schools of thought in economics, but the dominant school is neoclassical economics. There can be no doubt that the neoclassical school of economics is the dominant school of economics in the western world. University courses that major in economics are overwhelmingly grounded on neoclassical principles, especially for microeconomics. In fact, the orthodox economist would regard the type of economics taught as being definitive, rather than as belonging to a particular school among alternative equally valid schools. ( Mair and Miller, p. 71 ). One may conclude that the basic nature of economics as expressed in modern day capitalism as well as in university teaching is the one  to be found in neoclassical economics.

10. Five Basic Elements of Consistency

One may ask, in what meaning is there consistency between basic beliefs and the technologies employed by a society? One may identify five fundamental elements in basic beliefs on the one hand and technologies employed on the other. By technology here I mean the strategies, policies and actions taken by the human agents to effect change in the external environment in order to realize the objectives the human agents have in mind. The five fundamental elements are belief in God, belief in the purpose of human existence, moral beliefs and ethics, scientific development, and strategies, policies and actions ( Hasibuan 4, 2000, pp. 26-28). These five fundamental elements are interconnected. In western countries, belief in God lies strictly within the private domain and does not posses any organic element with public policy. This is generally the case with secular societies of western countries where, as Dr. Anas Zarqa has put it  Humanity is the ultimate reality, and the significance and ultimate aims of this life, if any, ought to be sought within life itself and not beyond  it. ( Kurshid, 1980/1400 H., p. 10 ) Here the purpose of human existence is simply to maximize pleasure and minimize pain. Morality and the ethics of right and wrong will be solely based on such world-view. So also is scientific development including, most importantly for our purpose, the development of neoclassical economics. Here the approach used is that of positivism, the form of empiricism that bases all knowledge on perceptual experience and not on intuition or revelation. ( Google Web definition ). Based on neoclassical economics, the strategies, policies, and actions to maximize growth ( and profits in enterprises ) will be undertaken.  So there is relatively complete congruence of the first four components of basic beliefs with the fifth that is the technologies that have been adopted. It is also in this sense that Muslim countries in general have not been consistent as was elaborated previously.

11. Conclusions

The conclusions of the study may now be simply put; that there is need to be consistent  in physical behavior as well as in social behavior if the respective objectives in each sphere are to be achieved. In the physical realm this consistency is programmed by The Creator. In the social realm it is humans, through properly exercising their will, who have to create this consistency between their beliefs and external actions. In the case of Muslim developing economies there has not been such consistency with the result that these economies have failed to achieve what they should be achieving as Muslims. The western countries have largely been successful to maintain consistency between the basic beliefs as originally laid down by Adam Smith. So they have had a high measure of success in their socioeconomic development as measured by their standards. The differential achievements between Muslim societies and western societies are to be explained by the differential capability of each to be consistent with their respective beliefs with regard to socioeconomic development. These conclusions have clear implications for Muslim developing economies.

12. Implications for Muslim Developing Economies.

A strong recommendation can now be justifiably made that Muslim  economies have to abandon the basic strategy of their development based on the  principles of neoclassical economics. These principles are materialism and individualism.  These economies have to articulate their home grown concepts of development in terms of the operational paradigm of syariah or Islamic economics. This means that the Muslim countries have to redefine the methodology of their development strategies, the substance of the strategy, its mode of implementation, and the measures of success, to accord with the values and methodology of syariah economics. Indonesia has painfully realized that to effect the development of her people in accordance with Pancasila or The Five Principles, she has to rely operationally on the syariah paradigm. The neoclassical paradigm which has been adopted since her independence more than 63 years ago have failed to deliver the promise of independence of prosperity and social justice. She is now grappling with this paradigmatic change, under a President who seems to be sympathetic to the need for change. Muslim intellectuals, in and outside government, have a large task of articulating, in a policy oriented way, the various components constituting the basic beliefs and strategy in terms of values of the Islamic religion. For example, we need operational substitutes of economic growth and maximum profits as measures of institutional success, substitutes based on the maqasid syariah such as discussed by Misanam, et. al in their Islamic economics textbook ( Misanam, et. al., 2008 ). We do not want to always go on practicing a monetary system, interest free though it is, based upon fiat money and reserve requirements as it is now. We need syariah economics textbooks with a Quranic orientation methodologically to help effect a peaceful change from the conventional neoclassical system to syariah system. Each Muslim country needs to have its own text book. This is a practical way to rid ourselves from being forever trapped in a feigned kind of neo-liberal and neoclassical doctrinaire as aptly put by Choudhury. ( Choudhury, 2005, p. 1 ). There is a large concerted mission job that needs be done among us and our brothers who are still very keen and steeped with neoclassical economics and among politicians. It will be very productive if international Muslim mission organizations such as World Islamic Call Society and World Islamic Mission Association join hands to spread the messages that are the subject of this paper. As Muslims we should all join hands to usher in our long due contribution to human prosperity and justice in the modern age, reflecting the basic belief that Islam is a boon and a savior to all nature and humanity. Wallahualam bish shawab.

Bibliography

Bertalanffy, L.von.,1968, General Systems Theory, George Braziller, New York

Catholic Encyclopaedia  on CD-Rom, http://www.newadvent.org/cathen/0776/a.htm, retrieved January 20, 2007

Choudhury, M. A, Islamic Economics and Finance : Where Do They Stand ? in Bank Indonesia, et all, Islamic Economics and Banking In The 21st Century, International Conference, Jakarta, Volume I, 2005

Djojohadikoesoemo, S., Perkembangan Pemikiran Ekonomi (Development in Economic Thought.), Jakarta, 1991, Yayasan Obor Indonesia

Dornbusch, R. and Fischer, S., Macroeconomics, McGraw-Hill Publishing Company, New York, 1990

Geanakoplos,J , 2001 , Three Brief Proofs of Arrows Impossibility Theorem, Yale University Press, New Haven, USA

Hasibuan 1, S., 2006, Case Study of Muslim managed Organizations: The Case of Indonesian Development Agenda, a paper to be published, in the Journal Transformasi of the Department of Economics, Al Azhar University Indonesia, 2006, Jakarta, Indonesia.

Hasibuan 2, S., Pidato Pengukuhan Guru Besar Bidang Manajemen SDM (Professorial Acceptance Speech in The Field of Human Resource Management ), Muhammadiyah University Surakarta, Solo, Central Java, Indonesia, March 5, 2008

Hasibuan 3, S.,  Sistem Perencanaan Pembangunan Nasional: Alat Bagi Kebangkitan Bangsa? ( System of Development Planning: A Means for Uplifting The Nation?),  Bulletin, Faculty of Economics, Al Azhar University Indonesia, Jakarta  Vol.2 No.3, August 2008.

Johnson, L.G., 1983, Biology, Wm.C.Brown Publishers, Dubuque, Iowa, USA, pp111-112

Kurshid, A., Studies in Islamic Economics, International Center For Research In Islamic Economics and The Islamic Foundation U.K., Redwood Burn Limited Townbridge & Esher, Great Britain, 1980/1400 H

Mair, D., et.al, 1991,  A Modern Guide To Economic Thought, 1992, Vermont 05036, USA

Marshall, A., Principles of Economics, Eighth Edition, 1950, The Macmillan Company, New York

Misanam, M., et.al., Ekonomi Islam ( Islamic Economics ), Bank Indonesia and Indonesian Islamic University Yogyakarta, 2008, JakartaÂ
Â
Moser,P.,K. et. al., ( Editors ), 1995, Contemporary Materialism, A Reader, 1, London and New York, Rouledge

Paine, T., Rights of Man, Second Printing, 1921, J. M. Dent & Sons Ltd.,London and Toronto

Republic of Indonesia, 1994, Sixth Five-Year Development Plan , 1994/95 1998/99, Jakarta

Roll, E., A History of Economic Thought, 1978, Faber& Faber Ltd, ondon & Boston

Schneider, et.al., Relativity Theory, http://abyss,uoregon.edu/ rjs/ast 122/ lectures/leczo.html/., retrieved, December 24, 2008

Skidelsky, R., John Maynard Keynes, 1992, Macmillan London Limited

Smith, A., The Wealth of Nations, London, J.M Dent& Sons Ltd, 1960

Susilo, W., Kemiskinan di Indonesia ( Poverty In Indonesia), Harian Kompas ( Kompas  Daily ), Jakarta, 9 November 2006

Tabloid Republika,  14 November, 2008, Jakarta.

The Economist, November 22-28, 2008

The Holy Quran, English translation of the meanings and Commentary, King Fahd Holy Quran Printing Complex, Al-Madinah Al-Munawarah, 1411 H.

The New Encyclopaedia Britannica, 1991, Volume 5 & 27, Chicago

Smith, A., The Wealth of Nations, London, J.M Dent& Sons Ltd, 1960

Timmer, J., Scientists on Science in Ars Technica, The Art of Technology, November 8, 2006(http://arstechnica.com/journals/science.ars/2006/11/28/6104).

UNDP, Human Development Report 2007/2008, New York, 2007

Wrenn, M., et.al., Galbraith and Robinsons Second Crisis of Economic Theory, Association for Evolutionary Economics, March 2008.