The Cost of Capitalism: The Price of Islam

“But seek, through that which Allah has given you, the home of the Hereafter; and, do not forget your share of the world. And do good as Allah has done good to you. And desire not corruption in the land, indeed, Allah does not like corrupters.”  TMQ28:77

In the Capitalist economic system, the production and manufacturing goods and services, the status of global markets, employment rates, income levels and government size and spending are used to gage the measurement of a nation’s wealth. All of these factors contributes to what is known as Gross Domestic Product (GDP), and is the measuring apparatus for economic prosperity and mistakenly the social progress of a nation.

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The pioneers of this system envisioned a world in which Man would take control of their destinies, embrace the ideology of “survival of the fittest”, and exploit earth’s resources, maximizing profits and creating a polarized class system that would keep the masses struggling in conflict as long as the system exist. However, this system continues its decline not because of GDP indicators nor the patchwork that has to be done to keep it going, such as stimuli and bailouts, because we live under a system created by man. This is the basis of the capitalist system and this is the doctrine implemented by capitalist governments.

Adam Smith said it best in his magisterial work, “The Wealth of Nations”, he argued that governments have an essential role to play in enforcing contracts and promoting institutions to promote the quintessential Canadian virtues of “peace, order and good government.” While others may disagree, in the real world, where the assumptions of the Fundamental Theorems of Welfare Economics do not hold, contract enforcement and institutions exist to ensure that the governments are there to promote the capitalist agenda and that the “invisible hand” of the market needs the visible hand of government to establish and enforce the rules of the game.

It is by design and governmental policy that countries marked by large inequalities in wealth, tend to be dominated by a few firms controlled by a lucky few. Where monopoly power is exercised, is it any wonder that poverty and inequality become deeply entrenched? Consider the case of financial markets and lending to the poor. High borrowing charges undoubtedly reflect the high-expected rate of default on loans. If you are just barely making do, any unexpected expense or shortfall of income will force you to choose between feeding your family or servicing your loan. It really is not a choice. The problem is that because lenders cannot differentiate ex ante between those who are likely to pay their loans and those who will default, ex post, they have to assume that all borrowers are potential defaulters. All borrowers suffer because of the information asymmetry. This is an intrinsic form of capitalist policy, the lifeline that cannot be ignored. In simpler terms, it is the mechanism of a  riba-based system that keeps the conditions as such.

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The first and foremost reason riba is haram is because Allah declared it so.

“O you who believe, fear Allah and give up what remains of your demand for riba, if you are indeed believers. If you do it not, take notice of war from Allah and His Messenger.” TMQ 2:278-279

Based on Allah’s infinite wisdom He deems an action to be obligatory or prohibited, prescribing matters in man’s best interests, in this life and in the Hereafter, as He is the All-Wise, All-Knowing. Whole nations, large and small, have foreign debts so large that their riba payments on these debts are a crushing burden on the entire country. Debt literally kills. Some 11 million children die each year around the world due to conditions of poverty and debt. Former President Obasanjo, commented on the debt Nigeria faces:
“All that we had borrowed up to 1985 was around $5 billion and we have paid about $16 billion yet we are still being told that we owe about $28 billion.”

That $28 billion came about because of the injustice in the foreign creditors’ (lenders) interest rates. Riba conflicts with the spirit of brotherhood and sympathy, and is based on greed, selfishness and hard heartedness. It is also one of the major contributors towards inflation, trauma and depression due to mounting debts.

This is the reality of the capitalist economic system, on the other hand Allah (swt) has blessed us with the example of managing the economy through his Messenger (peace be upon him) and through the righteous predecessors as they established economic justice the world over. The economic policy of the Islamic State is the objective of the laws that deal with the management of human affairs. The economic policy in Islam is to secure the satisfaction of all basic needs for every individual completely, and to enable him to satisfy his luxuries as much as he can.

Therefore, Islam looks at every individual by himself rather than the total of individuals who live in the country. As such it is different from all other economic policies.

Islam makes its view towards what the society ought to be as a basis for its view towards the livelihood and prosperity. Therefore, one will find that the divine rules (Ahkam Shari’ah) have secured the satisfaction of all of the basic needs (food, clothing and housing) completely, for every citizen of the Islamic State. This is achieved by obliging each capable person to work to achieve the basic needs for himself and his dependents.

Islam obliges the children or the heirs to support the parents if they are not able to work, or obliges the State Treasury (Bait ul-Mal) to do so, if there is nobody to support them. As such, Islam requires that the individual secure for himself and his dependents the satisfaction of the basic needs i.e.adequate food, clothing and housing. If the individual cannot (for any valid reason) provide for himself and his dependents, then the state will insure that their basic needs are met and they are given from the State treasury. Islam then encourages the individual to secure the luxuries of life as much as he can.

The distribution of wealth amongst the people is carried out naturally through the means of ownership and contracts. The natural differences among people in their abilities and in their tendencies to satisfy their needs result in variations in wealth distribution among them. This could result in the possibility of poor distribution where wealth is concentrated in the hands of the few, while the rest of the people are deprived of it.

The hoarding of gold and silver, which are the standards of exchange could also occur. Islam has, therefore, forbidden the circulation of wealth amongst the wealthy only. In fact, Islam obliged that wealth be circulated amongst all the people. Islam also forbade the hoarding of gold and silver, even if a portion of the individual’s gold and silver had been given out as Zakat. These are just a few examples of the economic policy of the Islamic State.

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