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In his essay ‘The Economic Possibilities
for our Grandchildren’ Keynes envisaged a future that would afford people
the possibility to ‘live wisely and agreeably and well.’ At this stage,
he wrote ‘I see us free, therefore, to return to some of the most sure
and certain principles of religion and traditional virtue -- that avarice
is a vice, that the exaction of usury is a misdemeanour...’
The big question is why that time
of well-being is not possible now. What cause withholds us to achieve it?
Keynes answers the question while guarding us against the perils of moving
towards that stage too enthusiastically. ‘Beware!’ he said, after his vision
of the millennium ‘The time for all this is not yet. For at least another
hundred years, we must pretend to ourselves and to everyone that fair is
foul and foul is fair, for foul is useful and fair is not. Avarice and
usury and precaution must be our gods for a little longer still. For only
they can lead us out of the tunnel of economic necessity into daylight.’
So, ‘foul’ is useful. ‘Economic necessity’
makes it so. What economic necessity? To whom is this foul useful? Mine
eyes behold the minority affluent of my land living ‘happily ever after’
with their merry-making and with their easy access to the huge funds the
country borrows for the ‘economic necessity’ of affording these gods and
goddesses their never ending binge. And mine eyes behold the rest of the
living -- the ordinary majority -- struggling and striving and labouring
to eke out a precarious subsistence.
Yea, yea, there’s this wee, ‘growing’
middle-class as well, the youth of which have that fine ornament the gods
call talent -- talent which the youth spend more on vain efforts to emulate
them gods rather than on their own productivity and development. Yet, in
these youth there’s a reason for the dear country to hope. But the ‘foul’
is rarely useful to them in a land where not more than 2.5% of the revenue
expenditure is spent on education and where a talented young person often
has to figure out the grand puzzle: which honest trade, apart from speculation
of course, can afford him or her a profit high enough to pay for the heavy
interest on a loan of just three lac rupees from YIPS that is supposed
to be given to the talented youth who do not have enough capital already
to pledge as collateral for a true share of the borrowed funds our rulers
regard national wealth?
The question thus remains: to whom
is this ‘foul’ useful? and what ‘economic necessity’ justifies it? Time
has now clearly shown that the ‘invisible-hand’ has rarely been benevolent
to the have-nots, and that the celebrated ‘equilibrium’ it causes has no
relation as such with their ‘wants’ and needs, as it may result at a level
much below the needs of individuals; for demand in economics is not ‘wants’,
still less ‘needs’. Demand is money - votes, which determine what is to
be produced, how much is to be produced and for whom it is to be produced.
With this magic wand, the affluent can cause such patterns of production
and distribution as churn out superfluous luxuries, while the majority,
containing millions of potential, average innovators, entrepreneurs, thinkers
and skilled works -- essential for pervasive economic development -- and
a number of potential Einsteins, Edisons and Lee Lacoccas -- essential
for breakthroughs -- do not even get the share of resources to come out
of the vicious trap of poverty which confines their potential to the most
menial of chores for the rest of their lives. This is not only morally
despicable but very bad economics as well, for there is no factor of production
more important -- economically and socially -- than human beings. As Sismondi
(1773-1842) asserted, we must be concerned with not only how big the stock
of wealth is but also with ‘For Whom?’ it is being piled. ‘No nation’ he
said ‘can be considered as prosperous, if the condition of the poor, who
form a part of it, is not secure....’ -- in our case, that of the majority.
The ability of a nation to produce wealth depends not on the self-interest
of a few individuals, but on a culture conducive to the production of wealth.
As List (1789-1846) put it ‘The prosperity of a nation is great, not in
proportion to the accumulation of wealth, but in proportion to the development
of productive forces.’ Among these ‘productive forces’ are a required variety
of natural resources, science and technology, appropriate laws, law and
order, a congenial environment for industry, commerce and services, a sense
of proportion, and, above all, moral values. Says George Soule:
Again and again, it has been discovered that a nation
cannot much benefit merely by attracting large foreign loans and putting
up highly mechanised factories, unless more elementary cultural and material
advances have created the readiness to make good use of these facilities.
Education, health, desire for improvement, reasonably honest and orderly
government, a harmonious interrelationship among agriculture, manufacture,
commerce, and good transportation, are all found to be necessary....1
Culture is created by people, whose behaviour
is greatly influenced by the structure of the society and the pervailing
values. A thing is worth as much as people think it is worth. If the people
with the magic wand of demand think cottage industry is important and divert
their resources towards it, cottage industry will become important. If
they think construction of beautiful government buildings is more important
and direct their money-votes towards it, that construction will become
more important. The rigmarole theory of ‘the invisible-hand’ being stimulated
by economic activity to benefit everyone often fails when disparity of
income and wealth is so great as it is in our society. Even Keynes conceded
that wide disparity in the distribution of income has the tendency to increase
saving and restrict investment because the majority poor do not have the
ability to generate enough demand to stimulate investment out of the attempted
saving by the affluent.
The key word then is values. What
is more important to those who are important in society? Most of Western
economics has concerned itself with material welfare of man in the hope
that his material welfare will lead to prosperity and justice and compassion
in society. This topsy-turvy premise has justified the hedonism of the
‘economic man’ to the extent such justification was useful to the prosperous
class. Reality is the other way round. It is when the ethos of a society
consists in nobler values as justice and compassion, hardwork and industry,
and entrepreneurship and co-operation that material welfare is ensured
to the majority of its members. Where material progress has been made in
disregard or negation of nobler values, such progress has often, if not
always, been the outcome of exploitation of man by man.
The problem though is that the assumption
of ‘economic man model’ is not wrong per se. Each one of us does want material
benefit for his or her ownself and wants to take such decisions as would
lead to his or her material prosperity. Preservation of values, on the
other hand, often requires sacrifice of material benefit. Sure, we all
love to pay lip-service to the idea of being nice and all that, but, deep
down, hardly anyone wants to be ‘the sucker left holding the bag’2,
especially when no reward of any kind is anywhere in sight, not even in
the longer-run. Sure enough, it is part of human nature to be altruistic
also. But does that aspect of human personality make economic sense, especially
when we are talking about sacrifice in the real sense of the word, which
sacrifice is essential for concrete and lasting change in society, not
about paternalistic, condescending charity which cons conscience into accepting
as desirable much less than what is actually required? The answer lies
in that realm of human life which Western economics has unsuccessfully
tried to ignore: religion. The West began its age of ‘Enlightenment’ with
the virtual abandonment of belief in God and with its substitution by belief
in Nature. Even most of those who still held on to religion in one way
or the other believed that God brought His will to pass through nature
and its laws.
The philosophers of Enlightenment
insinuated that misery of man was the result of disobeying ‘natural laws’.
Nature now was the ‘Father’ -- impersonal, yet systematic and benevolent.
They talked about the results of ‘deviations’ from the norms of some imaginary
society in the distant past when everybody was happy because nothing ‘un-natural’
existed. As George Soule has put it ‘In this disguised form they revived,
without being conscious that they were doing it, the legend of the Garden
of Eden as the prototype of a new earthly paradise they were intent on
creating.’ But we know that life is rarely perfect. To sacrifice material
benefit in the true sense of the word just for the preservation of values
especially when no reasonable reward is in sight, not even in the longer-run,
is a decision that makes economic sense only if you are certain that in
such persecution ‘great is your reward in heaven’. That kind of reward
can provide Veblen’s3 ‘leisure
class’ and ‘captains of industry’ with the purposiveness they need to replace
the ‘virtues’ of ‘ferocity, self-seeking, clannishness, disingenousness,
and a free resort to force and fraud’ with genuine altruism where it is
most needed.
Therefore, religion, especially Islam,
gives an absolutely different direction to life than the one charted out
by Western ‘Enlightenment’. Indeed, in Islam, the very purpose of a person’s
life is different: it is servitude to God4.
With this purpose, the whole perspective changes. Life becomes a trial
rather than a reward or punishment. ‘Freedom’ does not remain a privilege
that is unrestrained by anything but ‘nature’ -- which itself can be cruel
as well as kind -- or a privilege that is considered justified in taking
no account of ethical constraints imposed by reason and Divine revelation.
Freedom becomes a responsibility.
All the directives and injunctions
of Islam -- whether they relate to a person’s economic activity or to other
social and individual dealings -- have one basic aim: the ‘purification
of a person’s soul’5 to enable
him or her to be a true servant and slave of God.
Such people as have no desire or inclination
to be God’s servants can easily find justification in concepts as
the ‘invisible-hand’ for their deviation, which makes them captives of
their base desires. To such people, the underlying wisdom of the laws of
God can rarely be explained. But to the servants and slaves of God, a lot
can be said. And if those who have authority and power among men -- the
affluent and the elite -- become men of God rather than becoming false
gods themselves, a lot can be done. As Robert Owen (1771-1858) said:
Any general character, from the best to the worst, from
the most ignorant to the most enlightened, may be given to any community,
even to the world at large, by the application of proper means; which means
to a great extent are under the control of those who have influence in
the affairs of men.
Assuming -- for the sake of argument only
-- that those in authority in our dear country are men of God, this unworthy
scribe would to like say a few things to the gods.... er, sorry,
to the men of God who live on the Mount Olympus in Islamabad and who serve
the rest of the country from up there.
In the following lines are some assertions
regarding Islam and economics followed by some suggestions for economic
policy making. Regarding Islam, it must be said at the outset that where
any unequivocal directive or injunction exists in the Qur’an or the Sunnah, the question of ijtihad
does not arise. The only task for a scholar of Islam is to interpret
the directives and injunctions in relation to their context. For example,
since Riba has been prohibited
in the Qur’an, what Riba means is a question which must be looked into vis-a-vis the context
and the language of the Qur’an.
While dealing with the question of the meaning of Riba,
the line of argument which takes into account factors extraneous to the
Qur’avn and, on that basis, regards practicable solutions which
do not fit into the context of the relevant verses of the Qur’an as the true expression of the meaning of the book does no justice to
this Divine source of guidance. Only that meaning can be accepted as correct
which truly emanates from the language and the context of the relevant
verses in the Qur’an. The question
of viability should be tackled thereafter6.
Ijtihad, or intellectual reasoning,
is for matters not touched upon by the original sources of Divine guidance.
A book is not interpreted by intellectual reasoning which is used to ‘rationalise’
it, but by using the principles of linguistics to arrive at the true meaning
of its contents. Therefore, if one finds those contents unreasonable or
impracticable, one should have the intellectual courage to say so. To put
extraneous solutions into the context of a book to ‘rationalise’ it is
downright intellectual dishonesty.
In the following lines, assertions
related to Islam are based on the interpretation of the Qur’an and the Sunnah and on a general understanding of Islam and its
spirit. These assertions should therefore be repugned or accepted on same
bases rather than on the basis of extraneous factors related to the question
of viability. Quite often what is practical and useful seems impracticable
because the overall environment necessary for it does not exist. In such
cases, it is not wise to do away with the ideal itself. ‘Ideals’ as a Frenchman
has put it ‘are often like stars. You can’t always reach them, but you
can use them to chart out your course.’ If you change the ideal on the
grounds that you can’t reach it all at once, then you’ll change the direction
altogether; then you’ll never get there. If it is difficult, or even impossible,
to be thoroughly honest in our society, it does not mean that our ideal
should be abolishing only 50% or 60% of the existing corruption. We have
to keep on trying to move gradually towards the ideal.
However, all the other assertions,
related to economics and the suggestions, that follow are subject to open
debate vis-a-vis their viability. But even here, it must be remembered
that quite often the solution to unresolved problems lies in the radical
vision of a path finder who has the sagacity and the courage to go beyond
existing perimeters. Any such person, whose vision is based on serious
academic work rather than on just whims, deserves a fair audience, if nothing
else.
Now, for the assertions:
I. Regarding Islam
1. Islam has not given any economic
system. In fact, it has not given any social system. A system is essentially
a set or assemblage of interconnected and interdependent things that form
a complex unity7. If Islam
had given social systems in that sense it would have been obsolete long
ago. It has however given certain universal ethical principles for the
purification of human soul.
2. In the case of vices which have
pervaded society to the extent that their eradication in one stroke can
only cause greater disruption and evil than the one which is sought to
be rooted out, Islam has always had a gradual approach towards implementation
(for example, its gradual prohibition of intoxicants during the Prophet’s
time -- sws)
3. Islam does not take away the freedom
of an individual to own and use wealth. Only in exceptional cases, where
the chances of exploitation are great, does it take away the right to ‘use’
wealth8. Also, it acknowledges
the fact that there are natural differences among humans in relation to
their abilities, circumstances and wealth. These differences create a harmonious
society if each individual is given a fair and just opportunity to
utilise his or her potential. Islam restrains the freedom of an individual
seeking his or her material benefit only to the extent that there is no
exploitation and that the collective and personal activities of an individual
do not hinder his or her soul’s purification, which purification is essential
for enabling an individual to become a true servant of God. Purification
of human soul is the underlying spirit of injuctions as the prohibition
of Riba and of directives as
the implementation of Zakah.
II. Regarding economics
1. There is no viable basis for institutional
credit creation -- the primary function of banks -- apart from interest.
If there had been, someone would have found it by now. The Jews tried it,
the Christians tried it, the Muslims tried it9.
All failed. It’s time we started looking for an alternative solution rather
than wasting further efforts on looking for alternatives to interest as
a basis for institutional credit creation. Perhaps, the solution lies in
looking for a banking-free economy rather than in looking for an interest-free
banking system. A radical idea perhaps, but one that needs looking into,
especially since preserving the existing structure of banking is not a
Divine commandment.
2. Since, as Paul Samuelson has put
it ‘A thing is worth what people think it is worth’10,
values can have the profoundest economic impact. In the promotion and preservation
of any value, the affluent and the elite who are at the helm of affairs
have a great role to play. It is not only through laws but also through
personal example that values are inculcated. That is why it used to be
a convention in true Islamic societies that a ruler’s standard of living
never went above that of an average person.
3. An economic system does not exist
in isolation. Any successful economic guideline requires certain accompanying
factors in the political, legal, social and cultural set-ups shaping the
economy11.
III. Recommendations
The economy should be re-structured
on the bases of a just distribution of wealth and self-reliance in such
a manner that gradually the government is left with no need to impose any
tax on its citizens others than Zakah12.
Details of this suggestion, which
is based on the ideas of Javed Ahmad Ghamidi13,
are presented by Shehzad Saleem in the next editorial. While considering
these suggestions in relation to budget making, the following points must
also be considered:
1. Usually, policy makers in our country
think of only one way of reducing the gap between revenue and expenditure:
increasing the revenue -- which is generally done through additional borrowing
or increased taxation or both. Yet, another way has always been there:
reducing the expenditure -- the wrong kind of expenditure. Expenditure
which eats up the stock of capital goods more quickly than it adds to it
or leads to such patterns of production and distribution as make the rich
richer at the cost of the development of the rest certainly needs to be
curtailed. Changing the structure of expenditure requires courage, commitment
and sagacity. But it can be done.
At the moment, the greatest curse
our nation is facing is debt-servicing. Domestic debt servicing alone was
Rs. 113 billion last year in the revenue account of the federal budget.
If the government, by taking the masses into confidence, musters up enough
political support to get the majority vote on this one14,
it can declare a moratorium on the payment of domestic debt on the basis
of the Qur’anic verse which
urges a lender to extend the time of ease for a borrower in straitened
circumstances15. All interest
payment on domestic debt can immediately be stopped on the grounds of interest
being un-Islamic. The current value of debt may be linked to gold and re-payment
assured on that basis so that no panic results. The facility of sale (through
the Exchange) of marketable instruments of this debt may continue. The
time-period for re-payment in gold (or value thereof) may be delayed for
at least 15 years so that ample time is available for generating income
by using the saved funds for productive and developmental enterprise. With
this one stroke, the largest chunk of expenditure can be dealt with. All
other superfluous expenditures must also be curtailed or stopped.
2. Zakah is usually thought of as a very narrowly-based tax. This tax, with
its inherent appeal of being an obligatory ritual of worship for a Muslim,
has a very wide base (as is explained ahead) and can be used for all collective
and State purposes. In this regard, the condition of Tamlik
imposed by some jurists, which restricts its use to personal possession
at the level of individuals who belong to the destitute class, has no basis
in the Qur’an or Sunnah16.
It is suggested that this tax be used to the fullest extent to broaden
the base of taxation, especially by including agricultural produce in real
terms.
3. Since the government has the right
to take away the right of use from incompetent owners of wealth so that
exploitation in society is checked17,
it should look into the possibility of sharing in the management of large,
under-utilised tracts of agricultural lands. Some suggestions in this regard
follow in the next section.
4. The financial system should be
restructured in such a way that interest is abolished and indigenous entrepreneurship,
especially at the middle-income levels and at the levels of cottage industry,
is encouraged. (See the first suggestion in the next section for how this
restructuring may actually be done).
5. Further foreign loans should not
be taken. Efforts should be made to retire all foreign debt in the next
15 years. Superfluous expenditure must be put to an end, the government
and its members should promote austerity by personal example, and the more
well-off segments of society should take the lead in making the dream of
full retirement of debt a reality. Had the present government been a true
leadership of the masses rather than of the affluent and of the industrial
bourgeoisie, one might even have suggested some drastic measures for the
retirement of debt, considering the gravity of the situation. These drastic
measures would have included among many others, redistribution or acquisition
of land on the basis of original ownership before the British took control
from the Muslim rulers of India and acquisition of or sharing in the management
of enterprises set up in the private sector through funds borrowed from
the State controlled banks and DFI’s. (Alternatively, a system of Khiraj could be used as suggested in the next section for ‘less drastic’
measures).
The unhallowed hand of this scribe presents
these suggestions with full awareness that in all probability the rulers
of today will rather choose to ignore them. But since there is hope in
the younger generation, these suggestions it must present. Perhaps, the
Nawaz Sharifs and Benazir Bhuttos of the future will pay heed to them in
a time when there is no difference between making money and making goods,
when the man who makes most money is no longer one who exploits others,
stifles indigenous enterprise with his interest-based business expansion
and cut-throat competition or who, with his speculation and interest-based
business activity, creates for small investors, entrepreneurs and for the
majority of people in society problems as panics, industrial failures and
unemployment.
But until then, until darkness gives
way to that daylight, it seems we have no choice but to continue in the
worship of avarice, interest18
and precaution as our gods.
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