Why Islamic economics is neither capitalism nor communism

MIT at 16, and the cost of becoming a human resource

The episode opens with Muzamil introducing Dr. Asad Zaman as a guest his audience had been requesting for over a season — and one whose relevance had only grown as economics moved to the centre of every Pakistani conversation. The profile is striking: a bachelor’s in mathematics from MIT, a PhD in economics from Stanford, both completed by the age of 22, followed by fifteen years teaching at the University of Pennsylvania, Columbia, and Johns Hopkins.

Dr. Zaman traces it back to his father’s educational philosophy. “He thought that this education is just a paper chase, it has no meaning — so one should get, but you need those papers for life. So he prepared us to finish this as quickly as you can so you can start living.” That philosophy produced a teenager who graduated from Karachi American School in 1971, enrolled at MIT at 16, finished in three years by taking a double load in his first year, and completed his Stanford PhD in another three.

But the efficiency came at a price. Reflecting on MIT from the vantage point of his sixties, Dr. Zaman is candid: “What I really needed as a 16-year-old was social skills, learning how to relate to people. I was already an introvert — MIT encouraged me in the opposite direction, to be more of an introvert, more specialized, more withdrawn.” The institution rewarded technical mastery and produced, in his telling, human resources rather than human beings. “Universities are teaching us how to become human resources. Human resources are not useful for them to have relationships to other people.” The distinction matters more now, he adds, because human resources are exactly what AI will replace.

The long road back: from assimilation to return

Fifteen years in American academia — Belgium, Pennsylvania, Columbia, Johns Hopkins — produced a comfortable life and a growing unease. Dr. Zaman describes arriving in the US at 16 wanting nothing more than to assimilate, and spending his twenties and early thirties pursuing the standard goals of that environment: pleasure, individual achievement, the Ivy League career track.

The disillusionment was philosophical before it was religious. “If you are intensely selfish, which is what you are taught to be as an individual — you pursue your desires regardless of whether it hurts others — the main source of happiness for human beings is loving and being loved, social relationships. And this involves necessarily sacrificing for others. By becoming strictly individualistic and selfish and pleasure-seeking, I had cut myself off from the central source of pleasure for mankind.”

He experimented with Zen Buddhism, encounter groups, and various California philosophies of self-fulfilment before picking up the Quran. What caught him was Ibrahim’s prayer — the acknowledgement that without guidance one will go astray. “I thought of it as an insurance policy. I didn’t really think that there was a god, but I said: if there is no god, no difference. But if there is a god, and I am hauled up on the day of judgement, I will say: I made this dua. You didn’t guide me, so what could I do?”

The decision to leave the US in the early 1990s was driven by two things: the sense that teaching American students made him “a glorified governess — very highly paid to teach children of an alien civilization,” and the calculation that keeping his own children from cultural assimilation would require more effort than he could sustain. A letter from a former student at Bilkent University in Turkey arrived without any application on his part. He took it as an answer to the dua he had made.

Turkey as a laboratory for the East-West conflict

Dr. Zaman spent six years in Turkey, from 1993 to 1999, during one of its sharpest secular-religious confrontations — Erbakan’s election and removal, the ban on hijab at universities, the slow build toward what would eventually become Erdoğan’s AKP. He and his wife occupied an unusual position: accepted by both the secular elite and the religious circles, able to hear both sides.

His assessment of the secular camp is blunt. “Atatürk had created a generation who were worshippers of the West and they were very shallow in terms of their thinking. My wife used to joke: women’s liberation is very hard everywhere, but in Turkey it’s very easy — you just put the skirt on the woman and she’s liberated.” Neither side, he says, was engaging with the deeper questions. It was tribal: my party versus your party, with no real examination of the underlying philosophy.

The experience sharpened his thinking about what Eurocentric education actually does. Later, at LUMS, he found himself in an institution he describes as “very much an outpost of the West — strongly capitalist.” It was only at the International Islamic University that he felt, as he puts it, at home: “These children are not Europeanized, they don’t think Eurocentric thoughts.”

The Eurocentric narrative and the colonial classroom

Muzamil pushes Dr. Zaman to define what he means by “Eurocentric” — aware, he says, that a certain kind of listener will have already switched off the moment the word is used. Dr. Zaman obliges with a precise account.

The Eurocentric narrative, as he describes it, holds that history begins with the European Renaissance, that rational thought was a European discovery, and that the rest of the world existed in darkness until the West arrived with its civilizing mission. “This is the Eurocentric narrative, which more or less has been swallowed and is part of our European education.” The consequence is that students who spend four years reading only Western-authored textbooks absorb, without being told explicitly, that all knowledge was produced by the West.

He invokes Macaulay’s Minute on Education as the explicit statement of what this system was designed to produce: “a class of intermediaries — these people will respect and admire us and be in awe of us, and they will have contempt and hatred for their own culture and people and heritage and religion.” The result, he argues, is that Pakistan has never achieved genuine independence. “We are still intellectually dependent and the system of colonization is based on the ascent of the colonized — educating the colonized to believe that they are inferior.”

Muzamil connects this to his own schooling, where the Mughal emperors were taught as decadent patrons of art while the West was building intellect — without the observation that Mughal artistic flourishing was itself evidence of an economically productive and peaceful society. The smartest students, he notes, are trained to want to leave: “My smartest mind will want to get out to the West and build that empire rather than stay with my own people.”

Islamic economics as a distinct civilizational project

The conversation turns to systems. Muzamil frames the standard binary — capitalism versus communism — and asks where Islamic economics sits. Dr. Zaman rejects the framing that Islamic economics is simply a variety of one or the other.

“Capitalism, communism, socialism — they’re all one in terms of assessing material prosperity, taking material prosperity as the goal of life. Capitalism is built on a very Darwinian worldview: life is a jungle, we are just animals, life is fierce competition, winner takes all, the purpose of life is to maximize pleasure.” Islam, by contrast, “is based on generosity, cooperation, community, social responsibility — values that are antithetical to capitalism.”

The practical expression of that difference, he argues, is the Islamic principle that the society as a whole bears responsibility for every member’s basic needs. “All of the children in Pakistan are my children. Just take responsibility, and now every policy must ensure that these children have a future.” Capitalism, he says, depends structurally on the opposite: a pool of exploitable labour requires that poverty be maintained.

He traces the post-war Keynesian period — roughly 1930 to 1980 — as an anomaly in which full employment was the explicit goal of government policy, and the top 1%‘s share of income fell from around 30% to 10%. The counter-revolution, he argues, was deliberate and documented: the shock doctrine, the 2% inflation target combined with a structural tolerance for unemployment, the explicit decision to wait for a crisis and move fast before anyone understood what was happening.

The one-party question and Pakistan’s class divide

Later in the discussion, Muzamil raises the question of whether developing nations need a form of authoritarian governance to achieve the long-range planning that democracy structurally prevents. He points to China, Malaysia, Turkey, and India under Modi as examples of countries that made rapid developmental progress under concentrated power.

Dr. Zaman agrees with the diagnosis but redirects the analysis. “The crucial thing about China is that there is one party and it is in control and it will remain in control for the foreseeable future — so they can do long-range planning. The biggest problem in Pakistan is that everyone is in the game for only two or three years. Nobody does any long-range planning. They are all getting their piece of the pie and getting out quickly.”

He speaks from direct experience: as Vice Chancellor of PIDE and a member of the Economic Advisors Council, he sat on senior government committees whose advice was ignored. “If I gave them advice that in five years you will get prosperity, they didn’t care. All they were looking at in a plan was: where is my cut?”

But he insists the real issue is not the form of government — it is the class structure. Pakistan inherited a colonial extraction machine: “a machine to extract money from the masses, not to develop them.” The elite class, educated in English, culturally Europeanized, derives its power from foreign patrons rather than from the masses. “The people who are relying on foreign powers to rule their own country cannot defy the foreign powers, and the agenda of the foreign powers is to keep the country colonized forever because they are extracting a huge amount of money.” He cites research showing that for every dollar of aid and investment flowing into poor countries, roughly three dollars flow back out.

Pakistan’s import crisis and the solution nobody will propose

On the immediate economic crisis, Dr. Zaman is characteristically direct. “The real problem is very simple and the solution is also very simple. But politically it’s not feasible.” Pakistan imports roughly $60 billion and exports roughly $30 billion. The $30 billion gap is borrowed, and the lender dictates policy. He quotes a former Citibank economist who was assigned to assess a Latin American country’s repayment capacity, concluded it was impossible, and watched the bank lend anyway: “The loan gives us power over their policies, and that’s worth much more than the money.”

The solution is import substitution: reduce what you buy from abroad by producing it yourself. The two largest items on Pakistan’s import bill are energy and agricultural products — including, he notes with some astonishment, sunflower seeds imported from Brazil. “If we straighten out our agriculture sector we could be self-sufficient. Energy: OGDC has schemes lying on tables for how to make Pakistan energy self-sufficient in three to five years. Iran is ready to sell us cheap energy but the big powers won’t let us buy from them.”

The reason this solution is never on the table, he argues, is the class divide. “Our economy is built on selling the wheat and rice of our population to foreigners to get dollars so that our elite upper class can buy luxury goods for themselves. A proposal that says let’s become agriculturally self-sufficient, let’s reduce imports — this will never sell to the upper class because that will mean cutting down their lifestyle.”

Fiat money, inflation, and the limits of crypto

By the end of the conversation, Muzamil raises the question of modern currency — specifically how Islamic economics reconciles with a fiat system that has been consistently devalued since Nixon decoupled the dollar from gold in 1971, and whether cryptocurrencies offer an answer.

Dr. Zaman argues that mainstream economic theory on inflation is simply wrong. “Inflation is actually caused by price increases. Price increases — who does that? The people who are producing. Why? To make bigger profits. Over the past twenty or thirty years in the US, the productivity of labor has increased hugely but the share of wages has remained flat and corporate profits have increased hugely. Inflation is due to class conflict. It’s a concealed weapon.” The Friedmanite claim that inflation is solely a monetary phenomenon, he says, is propaganda that prevents economists from looking at the actual mechanism.

On crypto, he is measured. The fundamental question with any currency is: who is authorized to create it, and on what basis? Bitcoin concentrates that power with those who have advanced computing infrastructure — “these skills are in Russia and some other places and are not very widespread in the Islamic world.” More fundamentally, crypto has no anchor tying its value to anything stable. “The value depends on consensus. If consensus changes, the value collapses.” He is more interested in Modern Monetary Theory as a framework that correctly describes how fiat currency actually works, and in the possibility of currencies anchored to labor time or other real productive measures. Central Bank Digital Currencies, he allows, are a potential answer — though the conversation does not go further on that thread.

His closing answer to Muzamil’s question about Pakistan in 2050 refuses the conditional framing. “What the future will be is in my hands and in your hands. It will depend on what we do.” Students who only want to run their kitchen will get mundane results. The early Muslims who built a civilization were, by the standards of their time, the most backwards people on the planet. “We want world leadership — we can have it. The future is in our hands.”