Humankind and Resource Distribution—IX: building institutions for shared welfare

What happens to a society when wealth is viewed only as private property and public welfare depends largely on occasional acts of charity?

By :Dr. Ikramul Haq
What happens to a society when wealth is viewed only as private property and public welfare depends largely on occasional acts of charity? Previous instalments in this series explored wealth creation through labour and exchange, the influence of money and debt, and how excessive accumulation can become a source of economic domination. The next important question is how societies can transform individual prosperity into long-term collective security without restricting economic freedom, enterprise or initiative.

Charity can provide immediate relief to people facing hardship, but it cannot independently guarantee access to education, healthcare, financial security and economic opportunities. These necessities require sustainable institutions, clear policies and systems that protect people’s rights rather than leaving their well-being dependent on the generosity of wealthy individuals.

Economic history provides several examples of institutions designed to distribute resources and support collective welfare. These include public treasuries, charitable endowments, cooperatives, mutual-aid organisations and modern social protection programmes. Although their structures differ, they share an important purpose: ensuring that wealth generates benefits beyond its immediate owners and contributes to the well-being of future generations.

In Muslim societies, the bait al-mal, or public treasury, and waqf, or charitable endowment, represent two important approaches to organising resources for public benefit. The former deals with collecting and distributing public revenue, while the latter involves dedicating assets to specific charitable and social purposes. Both institutions have played significant historical roles, although their administration and effectiveness have varied across different periods.

A public treasury raises questions that remain relevant to modern governments: who contributes financially, who controls expenditure, which communities receive priority and how public funds are audited? Collecting revenue alone does not guarantee economic justice. Public resources must be distributed transparently, managed responsibly and used to provide measurable benefits to society.

Waqf institutions followed a different approach by dedicating land, buildings and other assets to continuing social purposes. Income generated through these properties could support educational institutions, hospitals, water facilities, travellers and financially disadvantaged communities. Such arrangements helped establish a continuous source of funding that could survive beyond the lifetime of the original benefactor.

However, historical experience also demonstrates that charitable endowments were not always efficiently managed. Some became administratively rigid, vulnerable to influential individuals or unable to respond to changing social requirements. Research by economic historian Timur Kuran has highlighted how certain legal and administrative limitations affected the flexibility of historical waqf institutions.

The important lesson is not simply to revive historical arrangements but to understand how institutions can protect public resources through transparent rules, responsible management and effective accountability.

Modern economic research offers another perspective through the work of Elinor Ostrom, whose studies challenged the assumption that shared resources must always be controlled either by private owners or central governments. Her research demonstrated that communities can successfully manage common resources through cooperation, monitoring and collectively agreed rules, provided appropriate institutional arrangements exist.

Cooperative businesses offer another practical approach to shared economic participation. They allow workers, farmers, consumers and savers to combine resources while maintaining a role in organisational decisions. Credit cooperatives and mutual financial institutions can also direct savings towards productive activities and provide members with greater financial participation. However, their effectiveness depends on professional management, responsible lending and protection against misuse of authority.

Unlike conventional charity, which generally involves transferring resources from donors to beneficiaries, mutual institutions can also distribute economic power. Members gain opportunities to participate in ownership, management and decision-making. This can strengthen collective financial security, although weak governance may reproduce the inequalities these organisations initially seek to address.

Modern social protection systems provide another essential layer of economic security. Pensions, unemployment benefits, disability assistance, healthcare and family support programmes help individuals manage financial risks that cannot always be handled through personal savings.

The International Labour Organization’s global social protection assessments highlight continuing gaps in social protection coverage across countries. Limited access to healthcare, education and income security affects not only individual welfare but also productivity, employment opportunities and economic mobility across generations.

Public welfare should therefore be considered an essential part of economic development rather than merely government expenditure. Education and nutrition improve the capabilities of future workers, healthcare enables people to remain economically active, while financial protection allows individuals to take productive risks without facing complete economic insecurity.

Pakistan presents a particularly important example of these challenges. Despite a strong tradition of private philanthropy, charitable hospitals and community support, access to quality education, healthcare, sanitation, secure employment and affordable financing remains unequal. Voluntary organisations provide valuable assistance, but they cannot replace reliable public services and enforceable social protections.

The way forward requires connecting wealth redistribution with opportunities for economic participation. This includes effective taxation, stronger local services, accountable social insurance, cooperative businesses and transparent management of public and charitable assets. Government programmes must also be evaluated independently to establish whether allocated resources are reaching their intended beneficiaries.

The OECD’s recommendations on the social and solidarity economy recognise the contribution of cooperatives, associations, foundations and mutual organisations towards inclusive economic development.Such institutions can complement government policies and market activities by expanding opportunities for people to participate in economic decision-making.

An effective institution must remain functional beyond the influence of its founder or benefactor. Its resources should serve established public objectives, its administration should remain accountable, and its operations must withstand political changes and economic uncertainty.

Ultimately, the purpose of shared welfare is to transform a portion of present-day wealth into lasting opportunities for future generations. Schools, hospitals, public infrastructure and financial institutions become meaningful investments when they continue serving communities through transparent and sustainable arrangements.

Wealth that simply changes ownership may leave existing inequalities untouched. However, wealth invested in accessible, accountable and enduring institutions can transform the economic conditions of generations to come.

The next discussion in this series will examine how different economic systems have combined government intervention, market forces, industrial policies and human development, while considering their consequences for economic freedom and equality.

Endnotes

1. Amy Singer, [Charity in Islamic Societies](https://www.cambridge.org/core/books/charity-in-islamic-societies/), Cambridge University Press, 2008.

2. Miriam Hoexter, Shmuel N. Eisenstadt and Nehemia Levtzion (eds.), [The Public Sphere in Muslim Societies](https://sunypress.edu/Books/T/The-Public-Sphere-in-Muslim-Societies), SUNY Press, 2002.

3. Timur Kuran, [The Provision of Public Goods under Islamic Law: Origins, Impact, and Limitations of the Waqf System](https://www.jstor.org/stable/3185418), Law & Society Review, 35(4), 2001, pp. 841–898.

4. Elinor Ostrom, [Governing the Commons: The Evolution of Institutions for Collective Action(https://doi.org/10.1017/CBO9780511807763), Cambridge University Press, 1990.

5. International Labour Organization, [World Social Protection Report 2024–26](https://www.ilo.org/publications/flagship-reports/world-social-protection-report-2024-26-universal-social-protection-climate), Geneva, 2024.

6. OECD, [Recommendation of the Council on the Social and Solidarity Economy and Social Innovation](https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0472), OECD/LEGAL/0472, 2022.