The Moral Constitution of the Market: Freedom, Justice, Power and the Common Good in an Islamic Economic Order-Paper Six – Part 2T 2

AFRIEF ISLAMIC ECONOMIC RENAISSANCE PAPERS

PAPER SIX – Part 2

The Moral Constitution of the Market: Freedom, Justice, Power and the Common Good in an Islamic Economic Order

III. When Economic Power Becomes Market Domination

Economic power is not inherently unjust. Every functioning economy contains power. Entrepreneurs make investment decisions. Employers organize production. Investors allocate capital. Consumers exercise purchasing power. Governments establish rules. Financial institutions determine access to credit. Owners control productive assets. Some firms will inevitably become more successful than others. The Islamic moral question therefore cannot be:

Should economic power exist? It must be: When does legitimate economic power become domination? This distinction is essential. A successful entrepreneur who develops a better product and attracts customers is exercising economic power through value creation. A firm that becomes large because it is more productive is not necessarily unjust merely because it is large. A farmer who accumulates land lawfully and uses it productively is not automatically guilty of exploitation because another farmer owns less. Economic inequality, by itself, does not establish injustice. The problem emerges when economic power becomes capable of systematically restricting the legitimate economic agency of others.

This can happen in several ways. It can occur through monopoly. It can occur through control over essential infrastructure. It can occur through political connections. It can occur through exclusive access to finance. It can occur through control of information. It can occur through ownership of critical technology. It can occur through labour-market dominance. It can increasingly occur through digital platforms that determine which producers reach consumers.

The contemporary forms are new, but the underlying moral question is not. When does advantage become domination? When does profit become rent extraction? When does ownership cease to facilitate economic freedom and begin to restrict the freedom of others? These are questions that price theory alone cannot answer.

They require a moral theory of power. This is one area in which the Islamic tradition has considerable analytical resources. The objectives of Sharī’ah concerning wealth have been articulated around circulation, transparency, preservation, stability, growth and justice. Modern scholarship similarly notes the relevance of these objectives to questions such as monopoly, hoarding, exploitation and the fair circulation of wealth.

The implication is significant: The market should reward value creation, not merely control over scarcity. This does not mean that scarcity itself is illegitimate. Scarcity is an economic reality. What matters is whether control over scarcity arises from productive contribution, lawful ownership and legitimate investment—or whether scarcity is artificially created or manipulated to extract rents from those who have few alternatives.

The distinction between profit and rent therefore becomes central to the Islamic moral market. Profit may reward innovation, risk-bearing, coordination, entrepreneurship and productive enterprise. Rent, by contrast, arises when income is derived primarily from control over a privilege, protected position or artificial scarcity rather than from corresponding productive contribution.

This distinction has enormous relevance to Africa. The continent does not lack entrepreneurial energy. What it frequently lacks are institutional conditions in which productive enterprise consistently outcompetes political access, monopoly privilege and rent-seeking.

Where access to government contracts, licences, land, foreign exchange, subsidies or regulatory exemptions becomes more valuable than innovation, the economic system begins to reward a different kind of entrepreneur. The productive entrepreneur asks: What problem can I solve? The rent-seeker asks: What privilege can I obtain?  The first creates value. The second seeks to capture value created by others.

A moral economic order must therefore create institutions in which productive enterprise is more rewarding than rent extraction. That requires secure property rights, transparent procurement, predictable regulation, competitive markets, independent courts, access to finance and accountable public institutions. In other words, the moral constitution of the market requires a corresponding moral constitution of economic power. And economic power does not operate only through capital. It also operates through labour.

1. Labour Is Human Work, Not Merely a Commodity

The question of economic power eventually brings us to labour, because labour occupies a peculiar position in the market. Capital can be accumulated. Land can be owned. Machinery can be purchased. Financial assets can be transferred. But human labour is inseparable from the human being who performs it.

This distinction is fundamental. An economy may classify labour as a factor of production, just as it classifies land and capital. Such classification is useful for economic analysis. It becomes morally dangerous, however, when the analytical category is mistaken for the whole reality. A worker is not simply a unit of labour supplied to an employer.

Behind every hour of labour stands a human being—with dignity, family obligations, aspirations, needs and rights. The Islamic moral economy therefore does not begin by asking merely what price labour should command. It asks what justice requires in the relationship between the person who controls productive resources and the person whose labour contributes to their use.

The Qur’an establishes justice as a general principle governing human relationships: “Indeed, Allah commands justice, excellence, and giving to relatives, and forbids immorality, bad conduct, and oppression.”
— Qur’an, Surah al-Naḥl 16:90.

There is no reason to exclude the workplace from this command. A labour contract is therefore more than an economic arrangement. It is a moral commitment. Allah commands: “O you who have believed, fulfil [all] contracts.” — Qur’an, Surah al-Mā’idah 5:1

And the Prophet ﷺ gave extraordinary emphasis to the employer’s obligation to honour the worker’s entitlement. In the well-known hadith, Allah declares that He will be the opponent on the Day of Resurrection of the person who hires a worker, takes the worker’s full labour and then does not pay the worker’s due wage. (Ṣaḥīḥ al-Bukhārī, 2227).

The economic principle is clear: Labour creates a claim. Once the agreed work has been performed, the worker’s compensation is no longer an act of generosity from the employer. It is an earned right. This has implications beyond the punctual payment of wages.

If the market is morally constituted, then the bargaining relationship between labour and capital must also be considered. A contract may be formally voluntary while the surrounding circumstances make one party extraordinarily vulnerable. The existence of a contract therefore establishes an important legal relationship, but it does not eliminate the wider requirements of justice.

This is particularly important in economies where unemployment is high and workers have few alternatives. A worker who accepts an extremely poor contract because the alternative is destitution may technically have consented. But an Islamic moral economy cannot simply point to that consent and declare the resulting relationship just.

The objective is not to abolish differences in bargaining power. Such differences will inevitably exist. The objective is to prevent bargaining power from becoming systematic exploitation. This distinction allows the Islamic framework to avoid two opposite errors.

The first is to treat employers as inherently exploitative and therefore regard private enterprise with suspicion. The second is to treat every agreed wage as automatically just because it emerged from a contract. Neither position is adequate.

The employer is entitled to a return on capital, entrepreneurship and risk. The worker is entitled to fair compensation for productive contribution. The enterprise itself must remain economically viable. Consumers must be able to afford its products. The economy must remain competitive.

Justice therefore requires an institutional balance of legitimate claims, not the elimination of one side in favour of another.

This is why the Islamic tradition’s treatment of labour is best understood not as hostility to capital but as an insistence that capital cannot become morally invisible simply because it is productive. The owner bears responsibility. The worker bears responsibility. The enterprise bears responsibility. And the state bears responsibility for ensuring that the legal environment does not permit systematic abuse.

The deeper principle is that economic production is a form of cooperation between human beings. Capital without labour often remains inert. Labour without productive capital may lack the tools necessary to create sufficient value. Enterprise coordinates the two. Finance mobilizes resources. Markets connect production with consumerThe economy therefore works through relationships of interdependence.

Once this is understood, the Islamic moral economy does not ask merely how much each factor receives. It asks whether the structure of production allows the various participants to share fairly in the value they collectively create. That brings us naturally to the question of profit.

1. Profit Is Legitimate Because Risk and Responsibility Are Real

One of the most persistent misunderstandings of Islamic economics is the assumption that concern for justice requires suspicion of profit.

It does not. Islam does not condemn profit. It condemns wrongful gain. The Qur’an explicitly permits trade: “Allah has permitted trade and has forbidden interest.” — Qur’an, Surah al-Baqarah 2:275 The significance of this distinction is enormous.

Trade necessarily involves exchange, entrepreneurship, uncertainty and the possibility of gain or loss. A merchant purchases goods without knowing with absolute certainty whether demand will be sufficient. An entrepreneur commits capital before knowing whether the enterprise will succeed. An investor accepts uncertainty about the future. A producer commits resources before the final value of the product is realized.

Profit therefore has an economic rationale. It can compensate for entrepreneurship, coordination, innovation, investment and risk-bearing. The problem begins when profit becomes detached from these productive relationships. The Islamic moral economy therefore asks not simply: How much profit was earned? It asks: From what economic relationship did the profit arise?

This is one of the most important analytical distinctions in Islamic economics. A return generated through productive enterprise is fundamentally different from income extracted through deception, exploitation, monopoly manipulation or an unjust financial arrangement.

The legitimacy of profit is therefore connected to responsibility. The person who undertakes productive risk may legitimately benefit from success because that person also bears the possibility of failure. This is closely connected to the Islamic principle reflected in the juristic maxim: “Al-kharāj bi al-ḍamān” — entitlement to gain is connected to liability or risk. The principle helps explain why Islamic commercial law is concerned with the relationship between ownership, risk and return.

A person who seeks guaranteed return without accepting corresponding liability raises a different moral question from an entrepreneur whose capital is genuinely exposed to commercial risk. This is also why the Islamic prohibition of ribā cannot be reduced to a technical prohibition of one particular financial contract.

At a deeper level, it protects a relationship between capital, risk and productive activity. When finance becomes increasingly detached from the real economy, capital can begin generating claims upon economic activity without proportionate participation in its risks. That creates a structural problem. Suppose an enterprise succeeds. If the financier captures the upside while being insulated from meaningful downside risk, the economic relationship may become heavily asymmetrical.

Suppose the enterprise fails. If the burden falls overwhelmingly upon the entrepreneur, worker, consumer or public sector while the financial claim remains insulated, the allocation of risk becomes distorted. The Islamic moral economy therefore seeks a closer relationship between return and responsibility.

This does not mean that every Islamic financial arrangement must be based upon classical partnership contracts. Modern economies require diverse forms of financing, including leasing, trade finance, project finance, working-capital structures and other instruments.

The deeper principle is more important than the particular contract: Financial claims should not become detached from the realities of ownership, asset, service, risk and productive economic activity.

This principle also connects Paper 6 to the earlier papers in the series. Paper 1 argued for moving beyond the superficial question of whether a financial product carries an Islamic label and returning Islamic finance to its underlying moral purpose. Paper 2 established the importance of venture capital and entrepreneurial risk-taking. Paper 3 emphasized multiple economic pathways as a source of resilience. Paper 5 established that all economic institutions must ultimately serve human flourishing. Paper 6 now connects these arguments: A moral market requires a financial system that supports productive freedom rather than merely monetizing claims upon economic activity.

Finance should therefore help people build enterprises. It should help firms acquire productive assets. It should help communities finance infrastructure. It should support innovation. It should mobilize savings into productive investment. It should share and distribute risk appropriately. It should not become an autonomous sphere whose principal objective is the multiplication of financial claims.

This is not an argument against sophisticated finance. It is an argument for purposeful finance. The difference is decisive. An economy needs capital. But capital is a means of production, not a substitute for production. Finance should serve the economy rather than the economy becoming organized principally around serving finance. Once this principle is established, the next question becomes unavoidable: Who protects the conditions under which this moral market can function? The answer cannot simply be “the market itself.”

1. The State Must Protect the Market Without Becoming the Market

The idea of a completely self-regulating market is no more convincing than the idea of a completely state-directed economy. Every market requires institutions. A farmer needs secure land rights. A merchant needs enforceable contracts. An investor needs protection against arbitrary seizure. A worker needs protection against abuse. A consumer needs protection against fraud. An entrepreneur needs predictable regulation. A lender needs a functioning legal system. A manufacturer needs infrastructure. A society needs public goods whose benefits extend beyond individual transactions. The market therefore cannot exist independently of the institutional order established around it.

This does not mean that government must own the means of production. It means something more fundamental: The state establishes and protects the institutional conditions within which economic freedom can remain meaningful. Its first responsibility is therefore not to replace the market but to make legitimate market activity possible.

This includes maintaining law and order, protecting property rights, enforcing contracts, preventing fraud, preserving competition, providing essential infrastructure, correcting serious externalities and protecting citizens from forms of economic abuse that individual bargaining cannot adequately address.

The state also has responsibilities where markets systematically underprovide goods whose benefits extend beyond individual transactions. Infrastructure is an obvious example. A road may facilitate thousands of private transactions. A reliable electricity system may enable millions of productive activities. Education expands human capability far beyond the immediate student. Public health prevents losses that no individual household can efficiently manage alone. Water, sanitation, transport, digital infrastructure and basic security similarly create conditions for economic participation.

These are not arguments for government ownership of everything. They are arguments for recognizing the common-good dimension of economic life. The relevant Islamic concept here is maṣlaḥah—legitimate public welfare.

Economic policy should therefore ask not merely whether an arrangement generates private profit, but whether it contributes to legitimate human welfare and whether its institutional structure preserves justice. A privately operated hospital can serve the public good. A publicly owned hospital can fail it. A private bank can mobilize capital productively. A state-owned bank can finance strategic development. Neither ownership form guarantees justice.

Governance matters. Accountability matters. Incentives matter. Competence matters. Purpose matters. This is why the simplistic question—public or private?—is often the wrong question.

The better question is: Which institutional arrangement best serves the legitimate public purpose while preserving accountability, efficiency, justice and human dignity? This allows the Islamic economic framework to escape the ideological trap in which every economic question must be classified according to ownership.

There are activities for which private enterprise may be most effective. There are activities where public provision may be necessary. There are activities better undertaken through cooperatives, waqf, community institutions or civil society. There are activities that may require partnerships among all of them.

The Islamic moral economy therefore calls for institutional plurality under a common moral order. But there is an equally important warning. The state itself possesses enormous economic power. If that power is not constrained, the state can become the greatest source of economic privilege. –(To Be Continued)