In part one of this two part series looking at whether capitalism can be reformed the conclusion was no amount of reform can change acts which are driven by the capitalist system itself; this would be like arguing for a peaceful war. The debate that is needed now is on Capitalism’s replacement, as hard as this is for ideologues to swallow.
Liberals have successfully skirted around the issue of replacing capitalism and laid the blame to greedy bankers and defunct business models in order to defend capitalism. The failure of capitalism is not restricted to the financial crisis. Across the western world governance is effectively controlled by a tiny elite, rather than by the people. Social cohesion is ripping apart from its seams as many push their individualism to greater extremes at the expense of wider society. Wealth inequality continues to worsen as Capitalism has failed miserably in distributing wealth in an equitable manner.
These fundamental issues of representative governance, social cohesion and wealth equality have worsened in recent decades under capitalism and now need an alternative paradigm to address them.
Islam and governance
Capitalism’s failure in governance is due to the inseparable link between money and politics. As a result regular elections favour the elites. The problem with frequent elections is that the more elections there are the more there is a requirement for money. The frequency of elections biases politicians against tackling long-term challenges and instead incentivises them to focus on short-term popularity. While a country’s planning horizon should be measured in decades, political horizons are focussed on managing the 24-hour news cycle and how to win the next election. In essence the more elections you have the more likely you are to poison your system with money and short term thinking. This is what we see in the West today, countries dominated by powerful interests, riddled by political corruption and with soaring deficits and other long-term problems left completely un-tackled. What this eventually leads to is politicians failing in their fundamental duty, which is to serve the public. In essence politicians become obsessed with their futures not the country’s future. They are focused on their interest not the people’s interests.
Flooding politics with money also means those who control most of it, be they large corporations, financial institutions or individuals have a disproportionate influence on governance and law making and thus a greater say over society
In Islam corruption is rooted out through completely separating money and politics. In Islam the ruler is not an employee who gets paid a wage, since he is not hired by the Ummah. The Caliph is given a pledge of allegiance (bay’ah) by the Ummah to implement the Shari’ah and convey the Islamic Da’wah to the world. Although the Caliph is not paid a wage an allowance is assigned to him from the Bait ul-Mal [Treasury] to meet his needs. This allowance is a compensation for him since he is kept busy with the obligations of the office of the Khilafah and cannot work and pursue his own business interests. This allowance is determined by the Majlis ul-Ummah (an elected body) who will decide through shura (consultation) how much the Caliph’s allowance should be. They are the elected representatives of the Ummah and by giving them the ultimate decision prevents any abuse of the public funds by the Caliph. The ruler, governors, delegated assistants and judges – all the positions of ruling are not paid a wage but an allowance as compensation as they are unable to take on employment. In this way Islam ensures money and ruling are kept at a distance.
What the supporters of democracy confuse is the frequency of elections with effective governance. Whilst elections are a check on rulers who otherwise would become corrupt, there are many examples of leaders in politics, sports and business who have led for long periods without exhibiting any of these characteristics. For instance an alternative to both democracy on the one hand and dictatorship or absolute monarchy on the other hand is the election of a ruler with no term expiry as exists within the Islamic political system. This allows people on the one hand to freely choose their leader but on the other hand allows that leader the time to take tough long-term decisions for the benefit of the people.
Islam and Social Cohesion
In the West, individual freedoms have created perpetual conflicts and permissive societies. The promotion and glorification of individual freedoms is the bedrock of Western civilization. However, the dilemma secular legislators face is what is beneficial to one person may, and often does, impinge on the entitlement of another, without necessarily violating the space of the other person. People’s interests overlap and as a result there exists a constant renegotiation of entitlement.
More often than not, the underlying criterion for an action is self-gratification and fulfilment – the ‘what’s in it for me’ test? A society where an individualistic outlook is prevailing can only decline into a virtual free-for-all, as everyone, including the government, would attempt to take full advantage of life. Freedom therefore leads to people seeking their own benefit and more often than not, those with political and/or financial clout have the upper hand. This produces a host of problems, not least the conflict of peoples’ freedoms.
Islam has clearly ordained rights and responsibilities for women and men and not left this to men and women to debate over. Islam promotes the role of the woman as a mother, responsible for her household. Hence, those areas of society where women contribute – whether it is politics, medicine, education etc – will have to accommodate and protect the role of mother. A solid family structure is the bedrock of a stable society.
From a societal perspective Islam views all the inhabitants as humans rather than looking at their ethnicities or race. As a result all those who reside in the Islamic territories are viewed as citizens, irrespective of creed, colour or ethnicity. Citizenship is based on residency rather than birth or marriage. All those who hold citizenship are subjects of the state. The guardianship and the management of their affairs is the duty of the State, without any discrimination. Every person holding citizenship of the Islamic State enjoys the full rights decreed for them by the Shari’ah, whether he is Muslim or not. With regards to non-Muslims citizens, they are not interfered with regarding their beliefs and worship. They are treated according to their beliefs in matters related to diet and adornment within the general frame work of the law. Disputes related to marriage and divorce for non-Muslims are dealt with by appointing judges from themselves in courts set up by the state. In the public sphere Islam enforces its rules on every citizen Muslim and non-Muslim alike without prejudice. In this way all citizens are subject to the same rules in the public sphere.
Fundamentally, the laws an independent Islamic judiciary work to enforce are derived from the Islamic sources and this restricts what can be enforced as law. Because Islam’s fundamental source – the Qur’an is revelatory, what is lawful and unlawful are defined and thus neither the ruler nor the judiciary can deviate from this. This ensures every individual in an Islamic society clearly knows the laws they will be measured by and it is this certainty that creates social cohesion.
Islam and wealth distribution
Despite the global economy reaching $72 trillion, the largest in world history and global trade worth $36 trillion, (again, the largest in world history) never have so few been so rich and never have so many been so poor. Capitalism has failed in distributing wealth in any equitable manner. Even in the birth place of Capitalism and its current epicentre, Europe and the US, wealth distribution remains a massive failure. The dogmatic views on the free market and economic growth relegated wealth distribution to the theory of the invisible hand that only capitalist liberals are able to see, meanwhile the rest of the world, since such ideas were presented in 1778 by the god father of capitalism, Adam Smith, still await the fruits of this invisible process.
Capitalism almost exclusively focusses on wealth creation, relegating wealth distribution to the passive nature of the free market. This system has favoured the rich as wealth is merely circulated amongst them. In fact in a recent Oxfam report ‘working for the few,’ the richest 85 people across the globe share a combined wealth of £1trillion, as much as the poorest 3.5 billion of the world’s population.
The Islamic rules for wealth distribution centre on ensuring unrestricted wealth circulation. The importance Islam places on this is fundamental because every person or company as well as government originates income from trading and engaging with another person or company. Taxes levied by the state are regarded as income for the state and an expense to individuals. The monies spent on projects by government and salaries paid would be income for the individuals and an expense to the state. The money spent by employees on goods is an expense to them and income to companies. Any thing that gets in the way of such free circulation, such as hoarding, would lead to a fall in spending and in fact take wealth out of circulation.
Solutions unique to Islam in achieving unrestricted wealth circulation include:
- The Islamic economy is built around the real economy and does not have a Western style parallel financial economy that hoards massive wealth in bank accounts outside the real economy or ‘invests’ it in unproductive financial instruments.
- The Islamic economy has a secure and stable monetary policy with a gold and silver monetary base large enough to fulfil the cash requirements of the population.
- Islam’s fiscal policy removes direct and indirect forms of taxation, which leads to economic growth, and replaces it with a wealth based tax system. A wealth based tax system is more equitable and provides sufficient government revenues for much needed public services.
- The Islamic prohibition of interest frees up idle wealth. The removal of interest incentives wealth circulation in the economy through spending or investment rather than causing wealth to sit in banks to accrue interest.
- Islam has laid detailed rules on State intervention across the economy through the administrating of public properties (Al-Milkiyyah Al-Ammah), the prohibition of monopoly and the fixing of prices.
Fundamentally Islamic economics removes all obstacles to wealth circulation.
In conclusion, Capitalism has failed in many central areas of society and all attempts to camouflage this have also failed. Reforming the capitalist beast is just pushing the problem to another date in the future. It is now time to look at alternatives and with nearly 2 billion adherents globally, Islam is that alternative.