Wednesday, September 8, 2010

Economic theories of Ibn Khaldun

I_181_0378 Ibn Khaldun has spawned a number of basic theories of modern economics long before Adam Smith and David Ricardo. 

At the height of its power, the Islamic world not only excel in the field of political and military means alone. One important factor that sustains the progress of the golden era of Islamic Caliphate is a strong economic system. By controlling the world economy, the Islamic world had become a respected superpower.  
The golden era of the Islamic world has a line of economists who had devoted his thinking to build the Islamic Caliphate. One of them was Ibn Khaldun. Indeed, he is a Muslim scholar all-around. However, a Muslim scholar who was born in Tunisia, it has also contributed his thoughts on the economy.

Ibn Khaldun has spawned a wide range of economic theory, long before the birth of Western economists who claimed to be the father of economics such as Adam Smith (1723-1790 AD) and David Ricardo (1772-1823). Ibn Khaldun has spawned a number of basic theories of modern economics that still holds true.

Dicetuskannya theories that are the result of thinking that was born from observations of various people who then combined with a sharp analysis of the science and knowledge possessed. No wonder if Ibn Khaldun's time as a professor was asked al-Azhar University of Cairo, the Fatimids built.

During devoted himself in one of the oldest and leading universities in the world, Ibn Khaldun wrote a series of works fenomel in the economy, which until now still be the object of study. So what Ibn Khaldun's contribution in the economic field?

Ibn Khaldun was recorded as the first economist to systematically analyze the economic function, the importance of technology, specialization and trade overseas if the country experienced economic surplus. He also emphasized the role of government and stabilization policies to increase production output and the opening of vast employment opportunities for the community.

The economists have studied economics, sociology, political science and a variety of science lainnyauntuk understand human behavior and history. He revealed the fact that specialization is the main source of economic surplus. The statement was disclosed nearly three centuries before Adam Smith's revealing.

According to Ibn Khaldun, when there is an environment conducive to specialization, then the employers should be encouraged to conduct further trade and production. With specialization, one can benefit more from their business.

In explaining the specialization, Ibn Khaldun said,''Any particular type of craft to be produced by people who are adept and skillful in making a craft. More and more the various subdivisions of a craft, the greater the number of people who should be adept in making a craft.''

The craftsmen, he said, must have certain skills and they are from day to day become more proficient in making handicrafts. Their knowledge of craft is also growing. If this is done in a long time, then the craft will be deeply rooted and can be a good source of livelihood. 

According to him, specialization meant the coordination of various functions of the input. So, people will get more satisfaction by working together than working alone. In addition, coordination and cooperation in the production process must exist in entrepreneurship based on market forces.

Ibn Khaldun considers workers and employers as economic actors who are respected in society. Both are trying to maximize their activities to get the wages and profits. To him, profit is the main motive of entrepreneurship. Because, with production expected to reach many of the benefits could be extended.

Meanwhile, trade means the business to make profits by raising capital through the purchase of goods with low price and then sell it back with a higher price. Profit is the value realized from labor. However this value, namely the price of labor, is determined by the law of supply and demand. This point was not missed by Karl Marx and his followers.

According to Ibn Khaldun, the coordination, cooperation and direction of production factors in increasing economic surplus productive, is a process undertaken by entrepreneurs. The objective is to seek profit. Businessmen spend time, energy and capital to search for goods and services and then sell it back with a higher price to gain profit. 

Ibn Khaldun praised the initiative of the entrepreneurs in their productive activities and they deserve a profit from their business at risk. Even Karl Marx and David Ricardo could not understand this.

In addition, the economists that a legendary season also revealed an economic theory that states the price of goods and services are determined by supply and demand. When a good is scarce and demand rises, then the price becomes high. The traders will buy the goods at the center of the goods are manufactured. So they can buy cheaply.

''And they will sell these goods in an area that the goods are still considered rare and of course the high demand for these goods,''explains Ibn Khaldun. Thus, he said, the traders can sell the goods with high price and get more profits.

But when the goods that somewhere there are abundant numbers, then the price of goods is low. Ibn Khaldun also has successfully demonstrated the concept of long-term cost of production. He also continued to emphasize a stable monetary policy. Ibn Khaldun was really opposed to the policies that could play in currency values.

He worries, the authorities are tempted to play the currency to gain advantage in order to build palaces and to pay the salaries of mercenaries. If the authorities to do so, there can be inflation and the population will lose confidence in the currency.

According to Ibn Khaldun, the protection of the purchasing power of money that must be implemented as a form of justice for the community. Therefore, he proposed the establishment of an independent monetary agency under the authority of the Chief Justice, who fear Allah SWT. Because if under rulers who were not afraid of Allah Almighty, the ruler of the value of the currency could play for personal gain. 


Legendary economist in the Tax Views 

In an economic treatise that he wrote, Ibn Khaldun never write and discuss tax issues. The text contained in his book titled Muqqadimah phenomenal. Writing about the tax contained in section triggers an increase and decrease in income country / kingdom.
According to Ibn Khaldun, a newly founded kingdom, collecting taxes from citizens in the amount

that was not too great .. However, when the kingdom's growing, then the tax collected from its people is also becoming big.

If the founders of the empire / imperial follow the path of religion, they will adopt the tax authorized by the law of God that includes charity, kharaj (land tax), and jizya. Both zakat, kharaj, or jizya amount is too burdensome for the community. Besides such tax has been fixed and can not be raised.

Ibn Khaldun argues, an empire built into the system and the conquest of a nomadic tribe. Actually, he said, civilization is established to create a benevolent rulers, patience. Thus, he said, taxes and personal obligations that used to provide revenue to the kingdom should not burdensome.

''If the tax was not onerous, it will be subject to tax their duty with enthusiasm,''said Ibn Khaldun. According to him, society will be actively working to set aside part of their income, to pay taxes that light. So that more people will work hard to achieve revenue. The result, people who pay taxes will increase and also increases state revenues.

According to him, when an empire has experienced a long period and began to settle, no longer nomadic, kaka kingdoms will conduct business activities. Then modesty, manners, and patience began to disappear. Administration demanded more details. 

Members of the royal increasingly prosperous and full of fun.

''They live in luxury and new needs are less important start popping up,''he said. This, says Ibn Khaldun, pushing the kingdom to raise taxes on all classes of society, including farmers.
They wanted to bring in more tax benefits to the state. They also forced the sale of agricultural products to cities. When expenditures for the purchase of luxury goods is increasing in the government, it was certainly rising taxes.

As a result, people increasingly burdened and it makes the spirit of the farmers to work more and more faded. Because the more income they generate, the greater the tax should also be borne.

When comparing the cost of farmers' expenditures with revenues. They became increasingly frustrated. So they left the farm. This has led to a decrease in taxes collected by the state. So that the reduced state revenue.

''Therefore, should not apply the state or government taxes that are too high to make them hard-working people,''said Ibn Khaldun. Thus one of the important contribution of Ibn Khaldun in the economic field. DYes


By: Dyah Ratna Meta Novia

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