Islam in Office; If fundamentalist parties take power, how will they do business?

Byline: Stephen Glain

Judeo-Christian Scripture offers little economic instruction. The Book of Deuteronomy, for example, is loaded with edicts on how the faithful should pray, eat, bequeath, keep the holy festivals and treat slaves and spouses, but it is silent on trade and commerce. In Matthew, when Christ admonishes his followers to "give to the emperor the things that are the emperor's," he is effectively conceding fiscal and monetary authority to pagan Rome.

Islam is different. The prophet Muhammad--himself a trader--preached merchant honor, the only regulation that the borderless Levantine market knew. In Muslim liturgy, the deals cut in the souk become a metaphor for the contract between God and the faithful. And the business model Muhammad prescribed, according to Muslim scholars and economists, is very much in the laissez-faire tradition later embraced by the West. Prices were to be set by God alone--anticipating by more than a millennium Adam Smith's reference to the "invisible hand" of market-based pricing. Merchants were not to cut deals outside the souk, an early attempt to thwart insider trading.

Today, with a spiritual revival sweeping much of the Muslim world and with the Bush administration still keen on democratizing the region, it is worth asking how an Islamist movement would manage the economy. Since 2001, Islamist parties have made strong showings or won elections in 10 Arab countries (Morocco, Jordan, Lebanon, Turkey, Iraq, Iran, Bahrain, Egypt, Kuwait and Pakistan) and the Palestinian Authority. And none are clashing with the West on free-market economics. In Iraq, the supply-side economic-reform plan submitted in 2003 by former U.S. administrator Paul Bremer has survived with only minor revisions under Baghdad's new Shia-dominated government.

An interesting test came in the January election in Egypt, when the Muslim Brotherhood--the fountainhead of modern Islamism--took a fifth of the seats in Parliament. Now the largest opposition party, much of the brotherhood's appeal rests on its network of hospitals, schools and charities, which are often superior to state services (and help explain why the secular regime cracks down harder on the secular opposition than on the religious one). Fortunately for the reform-minded prime minister, Ahmed Nazif, the brotherhood's economic agenda is largely consistent with his own, albeit with a more populist twist.

The brotherhood embraces free-trade deals in general, but criticizes the government for failing to negotiate better terms for Egyptians. Though Islam tends to frown on tax collection, the brotherhood supports tax reform (not abolition) and opposes a proposed flat tax as regressive. It even endorsed the recent decision to lift budget-busting food and fuel subsidies, but wants to use Egypt's ample natural-gas reserves to finance a less painful transition to market prices. "It must be done gently," says Mohammad Habib, the brotherhood's first ...