{http://bit.ly/AZia2sm} Lead Paper for Discussion: JKAU Islamic Econ Journal (2021, forthcoming) – Video provides brief summary and intro the article. 1000 word writeup of summary/intro follows video:
Nobel Laureate Amartya Sen in his essay on Poverty & Famines(summary) analyzed causes of four major famines, in which millions of people died of starvation. One obvious POSSIBLE reason for famines is Scarcity: No Food. But empirical investigation of Sen leads to another possibility: Entitlement: No Compassion for starving people. In all four cases examined, Sen finds that local availability of food did NOT decline significantly, ruling out the SCARCITY explanation. Instead, he finds that food was being shipped out of Bengal at the height of the famine. WHY was food shipped out of famine area? Because Economic Theory of Supply & Demand says that Products should be sold to highest bidder.
The Secular Moral Principles which are the foundation of capitalism are Competition, Individualism, and Hedonism. Everyone is free to pursue their own (worldly) goals (pleasure, power, profits). Life is a competition; whoever can achieve his goal, is free to do so by any means he chooses. Since there is no afterlife or God, pleasure in this world is the only rational goal for all human beings.
These values of secular modern societies are dramatically opposed to Islamic values of Cooperation, Social Responsibility, and Generosity. Implementation of these values requires a Three-Dimensional approach: Individual, Legal, Institutional
Individual Behavior: Islam teaches us to Search for EXCELLENCE in Conduct. It provides us with the Ideal Pattern: Prophet Mohammad SAW as role model. He was sent as a Mercy to all nations. He was full of Compassion and love for all his Ummah. Following his example, we must learn to serve all of the creation of God, for the sake of the love of Allah.
Legal Framework: The elaborate and sophisticated Shari’ah provides the legal framework, which has been worked out over centuries. Nonetheless, at all times,we need Ijtihad to adapt this legal framework to modern institutions and environment. One point regarding this is worthy of note. Rights are defined for us by the Shariah, and Justice is a cooperative search to ensure that all parties get their defined rights so that Zulm or injustice is done to no one. As opposed to this, Justice in the West is adversarial, where both parties use all the power they have to WIN the case, regardless of right and wrong, or the requirements of justice. It is often the case that rich and powerful corporations tie up smaller weaker firms in false lawsuits to drive them out of business and eliminate competition.
Institutional Framework: The high ideals of Islam are given concrete shape in unique institutions which are designed to provide practical implementation in real world.
Generosity Versus Greed: Constrasting spirits of Islam and Capitalism are displayed in the institutions of the Islamic WAQF vs the Capitalistic BANKS. Those with excess wealth are encourage to spend on others, who are in need. The Awqaf were trusts established for public welfare, providing for education, health, and taking care of orhans, widows, and a wide variety of social projects. These Awqaf implemented the ideal of social responsibility – taking care of each other. As opposed to this, Banks encourage people with money to hoard and accumulate, without any regard to the sufferings and misery of others.
Cooperation Versus Competition: The Islamic spirit of cooperation is displayed in the institution of Takaful, which is based on taking care of each other in times of need. A group of people pool money with the intent to use it for emergencies which may befall any member of the group. As opposed to this, insurance is an adversarial contract where insurance companies try to exploit the needy by offering to sell them security against risks. There are countless cases of how insurance companies scam the insured, as well as scams done by buying insurance to defraud the company. This can be expected in an adversarial contract.
Service Versus Profits: While capitalist firms put profits above all ethical and social considerations, Islamic firms are driven the spirit of service. Historically, Islamic guilds cooperated to provide excellent service to society at low prices. In contrast, capitalist corporations are driven to make profits, regardless of harmful consequences. For example, corporations sell baby milk powder to the poor, knowing that this will lead to millions of deaths among babies. Similarly, large scale warfare, killing millions and destroying countries, is carried out for the sake of corporate profits.
Concluding Remarks: Modern Economic Theory CLAIMS to be positive, objective, factual. In fact, it is a DEEPLY NORMATIVE theory. The purpose of modern economics is to JUSTIFY and IDEALIZE capitalism: Exploitation of Laborers, Concentration of Wealth. These are DISASTROUSLY bad moral foundations. A revolutionary new approach to economics can be built on the radically different moral foundations of Islam.
Full paper can be downloaded from SSRN. Copy on SCRIBD is linked below. For closely related post, see: Economic Theory: Normative Judgments Disguised as Objective Realities