The answer to this apparently simple question is surprisingly complex. This article can only provide a brief sketch. Early in the 20th century, about 90 per cent of Muslim lands were colonised. The two world wars substantially weakened the European powers, and enabled liberation movements to succeed all over the globe. At the time, there were two competing models for organising economies: capitalism and communism. Revolutions are driven by ideologies, and leading Islamic thinkers like Maududi and Baqir Al-Sadr offered a third alternative as the natural option for newly-liberated Muslim countries. They argued that Islam had its own distinct economic system, and this system was superior to both capitalism and communism. For reasons to be discussed, this idea of constructing a radical alternative to dominant economic systems was not realised in the post-colonial period.Colonial educational systems had explicit goals to create a buffer between the rulers and the colonised, as described by Lord Macaulay in his famous MINUTE ON EDUCATION: “We must at present do our best to form a class who may be interpreters between us and the millions whom we govern; a class of persons, Indian in blood and colour, but English in taste, in opinions, in morals, and in intellect.” These intermediaries were called ‘compradores’ in Latin America, BLACK SKINS WITH WHITE MASKS (Frantz Fanon) in Africa, and BROWN SKINS WITH WHITE MASKS (Hamid Dabashi) in Asia. They ran the vast administrative and bureaucratic structures on behalf of the colonisers, and naturally came into power following independence. These compradores were trained to believe in the superiority of the colonisers, and to treat their heritage, ancestors and indigenous society with contempt. Plans for an Islamic economic system were put on the back burner as Islamic groups engaged in the struggle to wrest control from secularised and Westernised compradores. For complex sets of reasons, these struggles were unsuccessful and the compradore class succeeded in retaining power throughout the colonised lands.Second generation pragmatists saw that the required revolution did not appear to be forthcoming. They abandoned the grand vision of the founders for a just and equitable alternative to both capitalism and communism. More limited goals were targeted. Instead of rejecting capitalist institutional structures, the new Islamic economics (nIE) attempted to tinker with capitalism in order to make it conform to Islamic principles. A popular formula for defining the subject became: nIE = Capitalism – Interest + Zakat.Large numbers of second generation Islamic economists acquired professional training in modern economic theory. In the course of their study, they came to believe in the epistemological claims of discipline. Economic theory claims to be a positive discipline, on a par with the physical sciences. The second generation was unable to see through these claims, and came to regard economic laws as being on a par with physical laws: objective, factual, indisputable and without normative elements. The laws of supply and demand were seen as having the same validity as the law of gravity. This misconception was fatal to the project of developing a genuine Islamic economics. Whenever the second generation saw a conflict between Islamic principles and economic theories, they assumed the validity of economic theory, and sought to rationalise or modify Islamic principles so as to remove the conflict.This attempt to harmonise Islam with economics has been abandoned only recently, after the global financial crisis revealed that economic theory, the ‘emperor’ of the social sciences, has no clothes. Nobel laureates were led to ponder why the entire field has gone astray, leading economists responsible for crafting policies which led to the crisis confessed to making huge mistakes, while the US Congress set up a committee to investigate the failure of economic theory to provide warnings about the impending crisis. The root cause of this failure is that modern economics claims to be an objective description of reality, while in fact it is a normative and prescriptive theory. Economics assumes that everyone acts selfishly to maximise lifetime consumption, without any concern for others. Furthermore, this is rational behaviour, which leads to optimal outcomes for society. For example, Nobel laureate Milton Friedman vehemently rejected the idea that businesses have social responsibilities and asserted that their only responsibility is to maximise profits, regardless of social costs.Evidence has accumulated from many different fields of study that the economists’ description of human behaviour is not empirically accurate. Human beings are naturally inclined to be cooperative and generous, even to the extent of giving their lives to save strangers. Describing competition and greed as natural and rational actually creates these behaviours, so the economists learn to be more selfish than their classmates in other disciplines. The global financial crisis was caused by the greedy behaviour of the financial industry, which sold mortgages to unqualified people, making profits from a process that wiped out lifetime savings of their customers. Such behaviour was enabled and created by standard MBA teachings, which place the bottom line above all other considerations.Instead of a jungle, with survival-of-the-fittest as the ideal form of social organisation, Islamic economics prescribes generosity and cooperation as the behavioral bases for an ideal world. The Holy Quran is full of encouragement to spend generously on others. Just like economic theory prescriptions of selfishness and competition create such behaviours, ideals of generosity and cooperation also create such behaviours. Throughout the thousand-plus years of dominance of the Islamic civilisation, basic needs of the population were recognised to be a social responsibility. Education and health needs were not commodities to be sold in the marketplace to those who could afford them. Rather, society arranged to take care of these needs for all members. Everybody can see the outcome of the competitive jungle of modern economics in the form of stark inequality, misery for billions, combined with luxury for a select few. At the core of Islamic economics is the idea of social responsibility — as a society, we are collectively responsible for the needs of all members, and not just for those who can earn enough money to purchase these needs in the marketplace. Is this not an ideal worth striving for?