It is almost impossible to watch or listen to a news programme daily without mention of increased levels of debt, or another bail-out package, stock market crisis or wildly fluctuating commodity prices. This turmoil is now the norm, and the real question is where will it all end? Can we really spend our way out of this crisis? How many more austerity measures are needed…more importantly, who will suffer from these and for how long? The prevailing economic system has produced a disparity in wealth which is so stark that even the wealthiest individuals in society are calling for tax hikes to save the situation. This shows that the economic building blocks need to be dismantled, as they have failed to produce a commercial model which not only promotes free enterprise and rewards effort, but is at the same time equitable and sustainable for a global society.
Time to Ask the Difficult Questions...
Too often I have heard people, whilst acknowledging that the western capitalist system is a long way from perfect, stating ‘but it’s the best we have…’ or ‘it’s better than the alternative...’ …whatever that perceived ‘alternative’ may be. However, the gravity of the current global meltdown has people now openly questioning what were previously perceived as holy grails. In the same way the long held belief in Einstein’s discovery of E=MC2 is being challenged by scientists today – any scientist brave enough to challenge this just a week ago would likely have been supervised in a straitjacket to a padded cell – those with independence of mind are questioning the future of capitalism. The BBC recently posed the question ‘Has Western capitalism failed?’ on its website. Intellectuals are now prepared to argue that a different model needs to be adopted.
...Accept the Current Predicament...
In the early 1950s, a U.S. social psychologist conducted an experiment, whereby he infiltrated a cult that believed UFOs were coming to rescue them from a flood that would destroy the earth. As the supposed Judgement Day came and went, the leaders, instead of altering their views as incorrect, simply assigned a longer time horizon to their expectation, and encouraged members to escalate their own commitment. This helped them to avoid the pain of realising the ideology they followed was false… at least for a while longer.
The behaviour of our own political elite today could be interpreted in the same way. Rather than accepting that the current course of capitalism is flawed, we are urged by our leaders to commit ourselves to the system even more, and encouraged to pull together to resolve the debt crisis.
One really needs to stop and think... just whose debt is it we are being asked to pay off through increased taxation and reduced services? Surely the free market policy we prescribe to dictates that those responsible for poor investment decisions – primarily the banks – should be liable? And if that’s means they collapse, why are we paying for their profligacy?
One commentator put it quite simply... if a child over spends on your credit card, the only solution is to take the credit card away…to extend the credit limit will in no way rectify the overspend.
...And the Unpalatable Truth!
‘Once you eliminate all other possibilities, whatever remains, however improbable, must be the truth.’ Such goes one of Sherlock Holmes famous quotes. So, what are the possibilities, and what will remain? Therein lays the current predicament for the upholders of the current world order. What they would like the populations to believe is that the only alternative to the capitalist system is socialism. And what kind of alternative is that? In truth, once the two models of economics are eliminated – socialism, which has already been rejected by nations globally, and capitalism, which is now crumbling under a mountain of debt, there is only one alternative – an economy based on Islamic principles.
This is the unpalatable truth which many cannot bear to hear.
The Need for an Alternative
So, what is it that the Islamic economic system has to offer? Why is it different? Can it resolve the problems of the global economy today?
Some of the principles are well known and being talked about by serious economists who are brave enough to consider an alternative. For example, a return to the gold standard to underpin the money supply is now openly debated and being established in small pockets. Economist Chandran Nair, of the Asian Think Tank GIFT (Global Institute For Tomorrow), is one of those also open to consider a different model. His contribution to the debate about capitalism can be seen here, and his discussion with Stephen Sackur on free market capitalism on Hardtalk is also well worth watching. Although he does not argue from an Islamic viewpoint, his ideas demonstrate the thinking about a revised model which fundamentally challenges the underlying principles of how we view an economy.
Islam – The Balanced System
Islam as an ideology can be understood to be the ‘middle way.’ It is a balance between the extremes of free-market capitalism of the right, and authoritarian socialism of the left. This balance is sometimes the reason people incorrectly equate Islamic with socialism (Islamic socialism movements were common in Muslim countries in the 20th century) as well as capitalist principles (freedom to earn, or market forces). As a system revealed by the Creator, it recognises human nature, the need for the fulfilment of basic needs, as well as the need for enterprise and entrepreneurial spirit. However, it does not dispense of a moral code which is sacrificed in capitalist economies, which result in the vast inequalities in wealth and opportunity.
This series of articles will take a detailed look at the principles which underpin the Islamic economic system, contrasting them with the principles seen in capitalist or socialist systems. We will also look at alternatives to the existing institutions, principles and beliefs. This will allow us to understand the real reasons for the crisis the world is now facing, and propose an alternative solution. Banks, interest rates, money supply, privatisation, limited liability, taxation amongst others will be discussed. Look out for the next article in this not to be missed series of articles...
Hamid Chaudry
Bayyina Foundation
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