Should we privatise our State Owned Enterprises (SOEs)? Would privatisation solve the management issues and make them successful? SOEs are, or should be, motivated by social service, while private sector works on the profit motive. Paradoxically, it seems that the profit motive creates more public benefits than social service. Is this really true? This is a hot topic of debate among economists, policy makers, and legislators, which has very serious consequences and implications. But some very important aspects are often overlooked in the discussion. There is no serious discussion among scholars on key variables such as integrity, honesty and morality, and motivation for work effort. Ignoring these central issues has led us to solutions that don’t work. The question of why issues central to the public versus private debate are neglected has to do with the fact that this question emerged in European societies within the historical context of modern secular states. Because the relationships between private and public sectors have been very different in Islamic societies, and were dramatically disrupted by the process of colonisation, there is a need of finding different solutions which are more relevant to our cultural, historical and religious context.

The problem is formulated in

the wrong way

When we talk about regulating enterprises from an Islamic perspective there are three main parameters; the institutional structure, the rules and regulations and the spiritual aspect. All three aspects are of central importance in terms of the comparisons between private and public sectors. Eurocentric conceptions exclude these considerations, focusing purely on institutional structures and law. Scholars like Weber and Tawney have shown the central importance of Christian ethics in the emergence of Capitalism, as well as the shaping of institutional structures in Europe. Similarly, Institutional structures which are compatible with our local historical context and ideological frameworks cannot be imported from Europe. Rather, it is essential to design our institutions in conformity with our social values and collective goals as a society. Given the right social values, both public and private enterprises would work with similar levels of efficiency, while a general failure of moral education in a society would be equally reflected in poor performance in both public and private sector. Thus the focus on public versus private misses the essential elements that we need to consider.

The origin of the problem

To understand the misconception that private and public sector represent polar opposites in terms of efficiency of operation, we need to go back to Europe where this idea originated. Centuries of violent religious warfare led to general dis-enchantment with religion. The secular state was conceived as a collection of communities living under common rule of law, but with different religions and no common purpose. The scope of collective action was restricted to the government, since the people were divided into communities with no collective identity. Thus, there was either public ownership or private ownership and there was no intermediary. Since there was no agreement on purpose, collective consensus could only be achieved on the mediating agencies of wealth and freedom, which would allow each community to strive for their separate goals. Wealth and freedom are intermediate goods, valuable only because they allow people to achieve their final purpose. Through a long and slow process, these intermediaries came to be regarded as the final goods – the ends for which we strive. It was the gradual decline of religion that took out meaning from the lives of the people. They were left with no clue as to what do with the freedom, liberties and wealth that they had acquired.

Religion and the rise of capitalism

Secular European society has erased its religious roots, so that the standard Eurocentric narrative ignores and neglects the strong contributions of Protestant religion to the emergence of Capitalism. This story has been developed in great detail by Tawney in Religion and the Rise of Capitalism and Weber in The Protestant Ethic and the Spirit of Capitalism. One of the central elements in the transformation of traditional society based on religion to a secular society was the change in attitudes towards wealth. The Christian maxim that “love of wealth is the root of all evil” was replaced by the Shavian maxim that “Lack of wealth is the root of all evil”. In particular, Calvinism introduced the concept that working is a sacred duty and that worldly wealth is a sign of the favour of the Lord. Parenthetically, Islam emphatically rejects this, and explicitly asserts that wealth is not a sign of the favour of the Lord. Nonetheless, this view became widely accepted, so that working hard and earning wealth, without indulging in luxury, came to be regarded as a sacred duty, required of good Christians. Originally, this conception was meant as a cloak for use by the religious people to enable them to enter the dirty and impure world of work and wealth without getting contaminated. However, even though religion lost its grip on minds and hearts, the habits of working for wealth became embedded within the cultural frameworks, excluding serious re-conceptualisation of lifestyles required by the loss of faith. In the elegant metaphor of Weber, what was meant as a cloak to be lightly put on for dealing with the world, became an iron cage.

Divorcing religion and

redefining knowledge

Loss of faith in the certainties of religion and afterlife had profound consequences on European society. Europeans learned to distrust the heart, which had led to collective consensus on the illusion that Christianity had proven to be. Enlightenment philosophers argued that all traditional knowledge must be put to the critical test of reason. Rejecting the heart, and relying solely on the rational faculty led to a highly imbalanced theory of knowledge, which could not provide answers to critical questions that we all face in our human lives. Based solely on rational calculations, all moral considerations can be set aside in pursuit of wealth and power, as recommended by Machiavelli. All of the modern social sciences were founded on the basis that men are rational robots without hearts and soul. Take the example of discipline of Economics. One of the core assumptions of Economics is that we live solely for the sake of the pleasure derived from consumption. Rational human decisions are guided by profit and loss consideration, so that honesty, commitments, trust, and sympathy are excluded from economic theories of human behaviour. The larger questions like a vision of the good life and the good society are lost from view, leading to a deep sense of meaninglessness. Today the world is governed by social science theories which are based on a deeply defective understanding of what it means to be human. The results of this are evident in the multitude of catastrophes which confront the planet as corporations pursue short-sighted profits, at the expense of laborers, environment, and humanity.

The writer is the VC PIDE, member, Economic Advisory Council to the PM.

The question of why issues central to the public versus private debate are neglected has to do with the fact that this question emerged in European societies within the historical context of modern secular states.