Summary
- Among them are public treasuries, charitable endowments, mutual-aid associations, cooperatives, municipal institutions and modern systems of social insurance.
- It is that durable social claims upon wealth can be created through carefully designed rules, but those rules must remain accountable, adaptable and subject to public scrutiny.
- Eisenstadt and Nehemia Levtzion (eds.), The Public Sphere in Muslim Societies, SUNY Press, 2002, on the social organisation of charitable and public institutions.
What becomes of a society when wealth is treated exclusively as private possession and public welfare is reduced to occasional charity? The preceding instalments have examined the creation of wealth through labour and exchange, the power of money and debt, and the danger of accumulation becoming an instrument of domination. The next question follows naturally: which institutions can convert individual prosperity into lasting collective security without extinguishing enterprise, freedom or initiative?
The answer cannot be found in generosity alone. Generosity may relieve immediate suffering, but predictable access to education, healthcare, income security and productive opportunity requires durable arrangements. The decisive advance occurs when a community moves from dependence upon the discretion of the wealthy to enforceable rights, accountable institutions and organised mutual support.
Economic history offers several approaches to this challenge. Among them are public treasuries, charitable endowments, mutual-aid associations, cooperatives, municipal institutions and modern systems of social insurance. Their forms differ, and none deserves uncritical celebration. Their common significance lies in an insight that conventional measures of private wealth often obscure: resources can be organised to produce benefits across generations without being consumed by their immediate owners.
In the history of Muslim societies, the public treasury, commonly described as the bait al-mal, and the waqf, or charitable endowment, illustrate two distinct institutional possibilities. The former concerns the collection and application of public resources under political authority; the latter involves property dedicated to specified continuing purposes. They should not be conflated. Nor should either be represented as a uniform, perfectly administered institution across centuries and territories.[1]
The public treasury raises questions familiar to every modern state: who contributes, who decides, which needs take priority, and who audits the use of funds? Revenue collection alone does not establish justice. A treasury can finance essential public goods or reinforce the privileges of rulers. Its economic legitimacy depends upon transparent allocation, equal treatment, effective scrutiny and demonstrable benefits to the population.
Endowments approached the problem differently. Land, buildings or other assets could be set aside so that their income supported schools, hospitals, water supplies, travellers, the poor and other designated beneficiaries. Such arrangements could preserve a stream of social expenditure beyond the life of the founder. They also reveal an important distinction between consuming a surplus and converting it into an institution capable of repeatedly meeting human needs.[2]
Yet history requires candour. Endowments could become rigid, poorly supervised or vulnerable to capture by administrators and influential families. Conditions imposed by founders sometimes limited adaptation to changing needs. The institutional form did not automatically guarantee either efficiency or equity. Economic historians have argued that particular legal and administrative characteristics of historical waqfs could restrict organisational flexibility, even while recognising their substantial role in supplying public services.[3]
The lesson is therefore not that an old institution should simply be restored. It is that durable social claims upon wealth can be created through carefully designed rules, but those rules must remain accountable, adaptable and subject to public scrutiny.
Modern economic thought supplies a complementary perspective. Elinor Ostrom’s research challenged the assumption that collectively used resources must invariably be privatised or centrally controlled. Her studies of common-pool resources demonstrated that communities can, under identifiable conditions, develop rules for monitoring, cooperation and enforcement. These findings do not mean that every commons succeeds. They show that institutional design and participation matter more than simplistic divisions between state and market.[4]
Cooperative enterprise offers another route. A cooperative can enable workers, farmers, consumers or savers to pool capital and bargaining power while retaining a voice in decisions. Credit cooperatives and mutual financial institutions can channel savings towards productive needs rather than treating members solely as customers. Their success, however, depends on sound governance, professional management, prudent risk assessment and safeguards against insider control.
The contrast with charity is fundamental. Charity ordinarily transfers resources from donor to recipient. Mutual institutions can also transfer power: they give members a stake in ownership, information and decision-making. Properly governed, they can turn scattered individual vulnerability into collective capacity. Improperly governed, they can reproduce the same hierarchy they were created to overcome.
Modern social protection adds a further dimension. Pensions, unemployment insurance, disability support, healthcare and assistance to families with children spread risks that individuals cannot reliably manage alone.
The International Labour Organization’s global assessments document substantial gaps in effective social protection coverage, despite progress in many countries.[5] This is not merely a humanitarian deficiency. Illness, insecurity and interrupted schooling reduce productivity, weaken labour-market participation and transmit disadvantage across generations.
Public welfare must consequently be understood as part of the productive architecture of an economy. A child who receives nutrition and education becomes better able to contribute. A worker protected against catastrophic illness can take productive risks. A farmer with access to insurance, irrigation and fair credit is less vulnerable to distress sales. Distribution and production are connected through the capabilities that institutions sustain.
This is where the argument developed throughout this series becomes sharper. If wealth is socially produced through accumulated knowledge, infrastructure, cooperation and legal order, then some of its returns must maintain the conditions that make further wealth creation possible. Public expenditure on capabilities is not necessarily a deduction from prosperity; when well designed, it is one of its sources.
The qualification is crucial. Not every subsidy is social protection, and not every public programme serves the public. Transfers to politically connected enterprises, opaque concessions and guaranteed profits for privileged investors may be presented as development while transferring risk to taxpayers. A welfare institution should be judged by whom it reaches, what it costs, how it is governed and whether it expands genuine opportunities.
Pakistan offers an especially demanding test. The country has long combined private philanthropy and community solidarity with unequal access to education, healthcare, sanitation, secure employment and affordable finance. Philanthropic hospitals, charitable trusts and voluntary organisations provide valuable services, but they cannot substitute for a dependable system of public entitlements. Nor can a social safety net, however necessary, compensate indefinitely for an economic structure that leaves productive opportunities concentrated in a few hands.
The essential reform is to connect redistribution with the creation of capabilities. This requires credible taxation, protected local public services, accountable social insurance, opportunities for cooperative enterprise and transparent governance of public and endowed assets. It also requires independent evaluation. A programme that announces large allocations but cannot demonstrate who benefited has not established its success.
The OECD’s work on the social and solidarity economy recognises the potential contribution of cooperatives, mutual organisations, associations and foundations to inclusive development, while emphasising enabling institutions and reliable measurement.[6] Such approaches should not be romanticised as alternatives to every market or state function. Their value lies in broadening the range of arrangements through which people can organise production, share risk and exercise economic agency.
An enduring institution differs from a benefactor in one decisive respect: its usefulness should not depend upon the continued goodwill of a single individual. It must survive changes of leadership, economic cycles and political preference. Its rules should protect beneficiaries rather than the prestige of founders; its assets should serve declared purposes rather than private networks; its accounts should be open to examination.
The historical question, then, is not whether public treasuries, endowments, cooperatives or welfare states belong to one civilisation or another. It is whether their underlying institutional insights can be combined with contemporary standards of accountability, equality, evidence and democratic consent.
A society becomes richer in the deepest economic sense when a portion of today’s surplus is transformed into tomorrow’s freedom: schools that continue teaching, clinics that continue healing, water systems that continue serving, and institutions through which ordinary people can participate in the decisions affecting their livelihoods.
Wealth that merely changes owners may leave the structure of deprivation untouched. Wealth organised into lasting, accessible and accountable institutions can change the conditions under which future generations live and produce.
The next inquiry must therefore move beyond institutional design to the comparative record: how have different economic systems combined state direction, markets, industrial policy and human development, and at what cost to freedom and equality?
Endnotes
1. For the institutional history of Islamic public finance and endowments, see Amy Singer, Charity in Islamic Societies, Cambridge University Press, 2008.
2. Miriam Hoexter, Shmuel N. Eisenstadt and Nehemia Levtzion (eds.), The Public Sphere in Muslim Societies, SUNY Press, 2002, on the social organisation of charitable and public institutions.
3. Timur Kuran, “The Provision of Public Goods under Islamic Law: Origins, Impact, and Limitations of the Waqf System”, Law & Society Review 35, no. 4 (2001), pp. 841–898.
4. Elinor Ostrom, Governing the Commons: The Evolution of Institutions for Collective Action, Cambridge University Press, 1990.
5. International Labour Organization, World Social Protection Report 2024–26: Universal Social Protection for Climate Action and a Just Transition, Geneva, 2024. Online source
6. OECD, Recommendation of the Council on the Social and Solidarity Economy and Social Innovation, OECD/LEGAL/0472, 2022.
[To be continued]
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Dr. Ikramul Haq, Advocate Supreme Court, Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), holds an LLD in tax laws. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He also served Civil Services of Pakistan from 1984 to 1996.
